From todays Globe and Mail Seeing it “positioned to execute,” iA Capital Markets analyst Matthew Weekes raised his recommendation for
Pembina Pipeline Corp. (
PPL-T -6.04%decrease) to “buy” from “hold” in response to a nearly 8-per-cent drop in share price last week, which he thinks has resulted in a “good entry point into the stock.”
In a research note released Monday, he said the Calgary-based company is “well positioned” to execute on its organic growth initiatives to serve “growing supply-push and demand-pull for western Canadian gas and liquids while delivering solid returns on capital and maintaining financial strength.”
“Customer demand for PPL’s infrastructure is supported by demand-pull for heavy and synthetic crude oil to meet local refining and diluent blending needs or to connect to further downstream transportation; condensate to feed oil sands bitumen blending; natural gas to support domestic coal displacement and cogeneration, future export capacity, and blue hydrogen; and NGLs to feed exports and growing domestic petrochemical production,” he said. “From a supply-push perspective, we anticipate strong activity from well-capitalized producers in PPL’s footprint and note that Canadian rig counts are trending near post-2014 highs.”
Mr. Weekes called Pembina’s growth, which has led to two guidance raises in 2022, as a “disciplined” while maintaining a “strong” balance sheet.
“PPL expects to exit 2022 with net debt/Adj. EBITDA at the low end of its target range, providing flexibility to pursue growth opportunities,” he said. “We anticipate that PPL will achieve 4.0-per-cent AFFO [adjusted funds from operations] per share CAGR [compound annual growth rate] from 2019-2023 while maintaining FFO/debt of more than 22 per cent and achieving ROIC [return on invested capital] above pre-COVID levels. PPL’s executive compensation structure is well-aligned with balanced shareholder objectives, with key performance indicators including ROIC, commercial opportunity development, maintenance of financial guardrails, and ESG, people and community objectives.”
Mr. Weekes trimmed his target for Pembina Pipeline shares by $1 to $49. The average target on the Street is $52.38, according to Refinitiv data.