Research, Charts & Company Announcements
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FEDERAL GOVERNMENT APPROVES PACIFIC NORTHWEST LNG
27 Sep 16
Impact: Modestly Positive, as TransCanada has $6.7 bn in projects depending on Petronas (Progress Energy) and its partners making a positive FID of the Pacific NorthWest LNG project and this ruling from the Federal Government brings these projects closer to materializing. However, it remains unclear as to whether a positive FID will occur.
ANNOUNCES BID TO ACQUIRE COLUMBIA PIPELINE PARTNERS, LP
26 Sep 16
Impact: Positive, as the Company was seeking strategic alternatives for the MLP and has made the decision that it would be best owned solely by TransCanada. The acquisition simplifies TransCanada's corporate structure with CPG and will provide optionality down the road for potential drop downs into a limited partnership entity. TransCanada is taking an opportunistic approach to this transaction as the price per unit of CPPL has dropped 43% since June 2015, when it traded at ~US$27 per unit. Based on an annualized EBITDA estimate from CPPL's 2Q16 EBITDA of $25 mm and the public's 53.5% ownership, we expect the transaction to have an acquisition multiple of 16.0x, compared to the FY2015 EV/EBITDA of 13.9x.
PROPOSES JV FOR US$800 MM REFINED PRODUCTS STORAGE AND INFRASTRUCTURE IN MEXICO
02 Aug 16
On August 2, 2016, TransCanada announced a joint venture to develop storage and infrastructure for refined products in Mexico and surrounding markets. TransCanada will have a 50% WI in the project, with Sierra Oil & Gas and Grupo TMM respectively holding a 40% and 10% WI. The planned in service date is unknown at this time and will be based on discussions with contract shippers.
Reports 2Q16 Results In Line with Expectations
29 Jul 16
TransCanada reported a comparable EPS of $0.52/share, in line with our estimate of $0.53/share and consensus of $0.52/share and EBITDA of $1.4 billion, in line with FCC/Street estimates of $1.4 billion. On July 1, 2016, TransCanada closed the $13 billion acquisition of the Columbia Pipeline Group and is working on $250 mm of annual benefits from the combination. In the quarter, TransCanada also reinstated a dividend reinvestment plan (DRIP), offering common shares from treasury at a 2% discount to plan participants. We have kept our 12-month target price at $53.00/share and maintain our Market Perform ranking.
REPORTS 2Q16 RESULTS IN LINE WITH EXPECTATIONS
28 Jul 16
TransCanada released its 2Q16 results showing a comparable EPS of $0.52, compared to our estimate of $0.53 and consensus of $0.52. The Company marginally missed our funds from operations (FFO) estimate of $887 million with actual FFO of $831 million. With a reported EBITDA of $1.4 billion, TransCanada was in line with FCC/Street estimates of $1.4 billion. Pipelines comparable EBITDA of $1.16 billion exceeded our $1.11 billion estimate; Energy (power and gas storage) EBITDA of $236 mm exceeded our $220 mm estimate. During the quarter, the Company made a one-time dividend equivalent payment to the subscription receipts issued for the acquisition of Columbia Pipeline Group and a once-a-decade maintenance outage at the Bruce Power facility; subsequent quarters should see better performance.
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Fighting the waves
25 Oct 16
Management action in response to a tough trading climate and falling profits should contribute to a sound recovery in profits next year. Following share price weakness, the group is valued at a substantial discount to both the broking market leader Clarkson and to other peers. Meanwhile, if the dividend can be held, the shares offer a well above-average yield, pending an eventual improvement in trading conditions.
21 Oct 16
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FY17 expectations unchanged. Interim dividend maintained
25 Oct 16
Interims reflect tough markets which impacted Technical. Shipbroking delivered a resilient result and Logistics has performed well. The interim dividend has been held at 9.0p. The group anticipate an improvement in H2. The Board’s expectations for the year are unchanged based upon the strength of the order book due in H2, its ongoing market coverage and the benefits of action taken previously. We have retained our FY2017 PBT forecast of £8.7m and a maintained dividend. We reiterate our Buy and adjust our TP to 450p.
Doing things differently
25 Oct 16
Growing pains have impacted on its operational performance (EBIT margins 5.8% FY15 vs 12.2% FY13) and the HSS Hire valuation is at distressed levels (price to book 0.4x vs 1.3x at the time of the float). As the top-line catches up with the expanded cost base and the roll-out of the NDEC leads to greater efficiencies, margins and returns will rebound. Historical experience has shown that price to book ratios typically match these improvements (see Ashtead FY08-FY15, price to book expanded +196%). Therefore, we see scope for material upside in the share price as the expected operational recovery to progress. Our 12 month target of 115p equates to a 0.8x price to net operating assets
Risks discounted leaving significant upside
18 Oct 16
FY 2016 sales grew strongly at +22% but EPS growth lagged at +3% (our revised forecast -1%) as staff attrition and significant investment in new services held back profitability. Conversion of profit into cash improved significantly, at 240% in H2, as shorter payment terms and a lower level of extensions also benefited. We make no major changes to our forecasts and reiterate our view that Utilitywise is at the forefront of a changing energy market, supported by investment in innovative technology. The current valuation is entirely focused on the short-term challenges and ignores the growth potential supported by the new services.