Keyera Hold Rating Maintained at TPH Ahead of Investor Day Tudor, Pickering and Holt on Thursday reiterated its hold rating on the shares of Keyera (KEY.TO) and its C$31.00 target price ahead of the oil and gas infrastructure company's annual investor day presentations.
"Keyera has underperformed the AMNA and Canadian peers by -8% and -10% YTD, respectively, largely on concerns of capex creep for the Key Access Pipeline System (KAPS), and weaker y/y EBITDA driven by normalized Marketing contributions," analyst Matt Taylor noted. "We expect the upcoming Investor Day on Mar 29th to provide more clarity on Marketing with respect to 2022 guidance and updated run-rate guidance.
For 2022, we see stronger contributions than previously expected (+C$20MM) driven by stronger RBOB pricing and recovering iso-octane premiums, partially offset by increased hedging losses. For run-rate guidance, we expect a higher range of C$210-250MM (from C$180-220MM) to account for normalized butane blending margins from recent investments placed into service. We adjusted our FY'22 EBITDA estimate to C$892MM (+2%) and DCF/sh to C$2.36/sh (+3%) to reflect stronger commodity margins in Marketing.
Apart from additional Marketing disclosure, we view the likelihood of incremental equity-moving announcements as low given updated commercial discussions on KAPS are expected closer to Q1'23 in-service, and new downstream projects either require producers to allocate more capital to growth and/or sanctioning of additional third-party petchem projects. We believe management will focus more on the "new rigorous capital investment criteria" with a focus on contracted cash flow going forward, reiterate a self-funding plan despite elevated leverage through the KAPS build-out, and outline ESG efforts in greater detail, such as the Shell partnership.
Overall, we still expect Marketing to be well below last year (-26%) but see 2022 falling within the updated run-rate guidance, shifting the focus to incremental required capex to complete KAPS and to participate in volume upside."