TD Report AltaGas Ltd.
(ALA-T) C$28.97
Q4/23 Results
Event
AltaGas Ltd. (ALA) Q4/23 AFFO/share of $1.20 was in line with our estimate of $1.20,
and above the Q4/22 AFFO/share of $1.17. ALA reported Q4/23 normalized EBITDA
of $502mm, which was above our estimate of $496mm, the recent consensus of
$500mm, and Q4/22 comparable EBITDA of $454mm.
Impact: NEUTRAL
Q4/23 Results: Q4/23 results were in line with our estimates, as performance across
the Midstream and Utilities segments were largely in line with our forecasts and the
stronger-than-expected Corporate performance driven by lower G&A and employee
costs was offset by higher-than-expected maintenance capital. Relative to Q4/22,
the Midstream segment benefited from stronger volumes and pricing, as well as
AFUDC on MVP, while higher margins in the retail business, lower operating and
administrative costs, and rate-base growth drove higher y/y Utilities results.
2024 Guidance Reiterated: ALA reiterated its 2024 guidance ranges for normalized
EBITDA of $1.68bln-$1.78bln and normalized EPS guidance range of $2.05-$2.25.
Project and Commercial Updates: ALA has integrated the Pipestone assets
and related employees following the close of the transaction in December 2023.
The company also brought into service two VLGCs—the Boreal Pioneer and the
Boreal Voyager—in December 2023 and February 2024, respectively. Management
continues to work towards an FID for its REEF project, which is expected in Q2/24.
ALA noted that the MVP pipeline is 99% complete and is expected to be in-service
in Q2/24.
Financial Forecasts Updated: We have updated our financial forecasts to largely
reflect Q4/23 results. We have also rolled forward our target valuation to be fully
based off our 2025 forecasts. When combined with our updated outlook, our target
price increases two dollars to $34.00.
TD Investment Conclusion
We believe the likely sale of MVP in 2024 and potential FID of REEF in Q2/24 would
be significant milestones in executing ALA's strategy. ALA's midstream business
continues to provide WCSB producers differentiated access to LPG exports off the
west coast, and the medium-term utility rate-base growth outlook is positive, in
our view. We believe the company is providing a diversified energy infrastructure
investment opportunity to investors with a medium-risk tolerance looking for above-
utility-average potential returns.