AltaGas Ltd T.ALA.PR.B

Ink Research

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Morning Report: New CEO buys as AltaGas makes waves in midstream 

November 15, 2023

AltaGas (ALA) is not your typical Canadian midstream operator. It has multiple natural gas gathering and processing

facilities in Western Canada, but its business also includes two west coast liquefied petroleum gas (LPG) seaports focused on serving Asia. ALA is also in the process of commissioning two new very large gas carrier ships, both leased for seven years with three-year extension options. The Boreal Pioneer is expected to have its maiden voyage in December 2023 with the Boreal Voyager expected to follow in March 2024. AltaGas believes these vessels allow it to extend its supply chain to Asia while helping to de-risk the shipping component of its midstream business. The vessels will be able to serve both of ALA's seaport terminals. Asian exports are a core focus for AltaGas and in 2024 it is expected to make a final investment decision on its proposed Ridley Island Energy Export Facility that would handle LPG, methanol, and other bulk liquids.

Since we last highlighted it here on December 24, 2020, ALA stock has sailed higher, up 45.3%, ahead of the S&P/TSX Composite (+13.6%) and S&P/TSX Utilities Index (-14.4%), but lagging the INK Canadian Insider Index (+56.1%). In 2021, ALA was expected to deliver a normalized EPS of midpoint $1.50 and ended up delivering $1.78. For 2023, ALA expects to be at or above its midpoint guidance of $1.95. In terms of normalized EBITDA, for the first nine months of 2023, ALA's midstream segment reported $502 million while utilities delivered $575 million. Normalized results remove the impact of asset sales and dispositions, risk management contract gains or losses and some other non-operating items. Vernon Yu became the new ALA skipper on July 1st. We have seen the new CEO buying after Q3 results were announced on November 3rd. ALA will pay a quarterly dividend of $0.28 per share on December 29th to shareholders of record on December 15th.