Citi Raises Target Citi analyst Spiro Dounis thinks Keyera Corp. is poised to benefit from a “a wave of impending capital efficient growth ahead, namely the filling of spare capacity on existing assets and downstream expansions across the current asset base.”
“We impute an unlevered 15-per-cent capex return and estimate these opportunities will drive a 7-per-cent fee-based EBITDA CAGR [compound annual growth rate] through ‘28, which could be the low-end of KEY’s updated guidance range (potential announcement coming in December),” he said in a research note released Monday titled Filling Up the Pipe.
“Accretive M&A and projects beyond Zone 4, KFSII/III present upside, in our view. We expect KEY to generate $0.3-billion of excess cash flow annually through ‘28, some of which may be returned in the form of a buyback. At 10.3 times, KEY now trades roughly inline with U.S. G&P peers compared to a historical 1.0 times premium since ‘22. We believe the tighter valuation spread and capital efficient growth outlook retains the compelling valuation offering.”
Reiterating a “buy” recommendation for Keyera shares, Mr. Dounis raised his target to $46 from $40 following an updated to his net present value (NPV) methodology. The average on the Street is $41.