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HOSTS 2016 INVESTOR DAY
27 Sep 16
Impact: Neutral. Veresen's Investor Day on September 27, 2016, provided the investment community with an indepth review of Veresen's historic, current, and future business operations. Senior management took the opportunity to discuss relevant issues and situations that impact each business and how the team intends to navigate its way forward. Veresen's future growth program is fully funded, assuming a sale of the Power business. Potential positive catalysts for the stock include a sale of the Power business in 1Q17e (to close in 1H17e) and incremental projects within Veresen midstream to be announced over the next 12 months.
SECURES $650 MM OF NEW CREDIT FACILITIES WITHIN VERESEN MIDSTREAM
07 Sep 16
Impact: Positive. Veresen Midstream has increased its borrowing capacity to fund its contracted capital growth program without the need of further financing. The majority of this available capital will be directed towards Veresen Midstream's contracted capital projects under construction, including the Sunrise, Tower and Saturn processing facilities. We estimate that Veresen Midstream, and its partners, have ~$1.5 bn left to spend on its capital projects under construction as it had incurred ~$1 bn of capital expenditures when it reported its 2Q16 financials. Veresen expects that with the funds from the pending power asset divestiture and this additional access to capital will fully fund the Company's $1.4 bn contracted capital growth program.
Releases Strong 2Q16 Results; Looks to Divest Power Business; Suspends DRIP
05 Aug 16
Veresen reported Distributable Cash Flow (DCF) of $94 mm compared to our estimate of $79 mm; in particular, the Pipeline division outperformed our estimates. Veresen has increased its previously announced Distributable Cash Flow guidance range of $0.94/share to $1.08/share up to a range of $1.03/share to $1.13/share. In an effort to focus on its core natural gas and NGL infrastructure business, Veresen has announced its intention to divest the power business. Veresen’s Board of Directors has elected to suspend the Premium Dividend and Dividend Reinvestment Plan. Our Outperform ranking and 12-MTP of $14.25/share remains unchanged.
RELEASES STRONG 2Q16 RESULTS; LOOKS TO DIVEST POWER BUSINESS; SUSPENSION OF DRIP
03 Aug 16
Impact: Positive. On its cash-based results, Veresen reported Distributable Cash Flow (DCF) of $94 mm compared to our estimate of $79 mm; in particular, the Pipeline division outperformed our estimates. Management expects to be able to achieve its FY2016 targets with distributable cash in the range of $1.03 to $1.13 per share (FCCe: $0.98/share prior to 2Q results).
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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.