Post by
incomedreamer11 on Jul 29, 2022 8:44am
TD comments
Event
AltaGas Ltd. (ALA) Q2/22 AFFO/share of $0.41 was slightly below our estimate of $0.42 and below Q2/21 AFFO/share of $0.49. ALA reported Q2/22 normalized EBITDA of $246mm, which was below recent consensus of $264mm and our estimate of $249mm, but above the Q2/21 normalized EBITDA of $230mm.
Impact: NEUTRAL
Q2/22 Results: Q2/22 results were slightly below our estimates, driven by higher Utility segment contributions, which were offset by lower-than-forecast results from the Midstream segment. Utilities segment results benefited from higher gas margins, Accelerated Pipe Replacement (ARP) spending, optimization benefits at Washington Gas, growth in customer base, and higher base usage. Although the Midstream segment benefitted from strong volumes and activity in the quarter, management indicated that operational performance was slightly behind company expectations as a result of hedging timing, tighter FEI to North America spreads, and increased logistical costs.
Model Updated; Introducing 2024 Estimates: We have updated our model to reflect the quarterly results, ALA's acquisition of the remaining 25.97% equity ownership interest of Petrogas Energy Corporation (Petrogas), as well as our 2024 forecasts. In our view, the key drivers of y/y growth are rate-base growth at the Utilities segment and continued volume growth in the Midstream segment. As a result of the updates, our target price remains unchanged at $34.00.
TD Investment Conclusion We believe that ALA's medium-term utility rate base outlook is relatively high and the midstream business continues to provide WCSB producers differentiated access to LPG exports off the west coast. In our view, the company is providing a diversified energy infrastructure investment opportunity for investors with a medium risk tolerance looking for above utility-average potential returns.