High praise from RBC for PPL for the balance of this year, 2022 and 2023. Target price is now $48.00. Below is the G&M article.
Pembina Pipeline Corp. (PPL-T -1.17%decrease) is “well-positioned to benefit from growing gas and liquids volumes,” according to RBC Dominion Securities analyst Robert Kwan, expressing “higher confidence” in its base business and growth outlook after an increase to its guidance.
“Whether it be uncontracted capacity or within its contract structures that blend minimum take-or-pay levels with fee-for-service upside as volumes grow, we expect Pembina to benefit from growing gas and liquids volumes in the Western Canada Sedimentary Basin (WCSB), particularly with its assets levered to the Montney, Duvernay and Deep Basin,” said Mr. Kwan. “Further, we expect growing volumes to result in contracted infrastructure opportunities, evidenced by the re-activation of the Phase IX expansion, some of which could be announced by the end of 2021.”
With the release of its quarterly results on Thursday, Calgary-based Pembina raised the low end of its 2021 adjusted EBITDA guidance to a range of $3.3-billion to $3.4-billion (from $3.2-$3.4-billion) due, in large part, to the impact of stronger commodity prices.
“We believe that the new guidance range has a measure of conservatism built into it,” the analyst said. “While we think some investors may have been disappointed in the specifics of the revision to guidance (i.e., we think some investors were looking for a shift higher for both the top and bottom ends of the range), management commented that it is still relatively early in the year, and we believe it has left the door open for a subsequent upward revision to guidance.
“We remain near the top-end of the guidance range. With the effective increase in guidance for 2021 giving us a greater degree of confidence in our forecast, our unchanged 2021 EBITDA estimate of $3.392-billion sits near the top-end of Pembina’s guidance range.”
Mr. Kwan also sees an improving outlook for 2022 and beyond, citing “encouraging commentary on producer activity” and the reactivation of its Peace Phase IX project.
Keeping an “outperform” rating for Pembina shares, he bumped up his target to $48 from $42. The average on the Street is $41.81.
“Following the end of the IPL saga, we maintain our midstream thesis favouring stocks, such as Pembina, that we believe are well positioned to benefit from growing WCSB gas and liquids volumes, both from filling spare capacity as well as underpinning new contracted infrastructure,” he said. “Further, while we believe some in the market were hoping for an increase in the entire guidance range, we think that Pembina continues to position its guidance conservatively with a reasonable chance that actual results will be at, or through, the high-end of the range.”