KML CN

Kinder Morgan Canada Limited

Energy


Presented:05/31/2017
Price:CA$16.72
Cap:$1.28B
Current Price:CA$14.91
Cap:$0.42B

Presented

Date05/31/2017
PriceCA$16.72
Market Cap$1.28B
Ent ValueN/A
P/E RatioN/A
Book ValueN/A
Div Yield0%
Shares O/S102.94M
Ave Daily Vol2,153,078
Short IntN/A

Current

PriceCA$14.91
Market Cap$0.42B
Kinder Morgan Canada Ltd. provides fee-based services to customers from an asset portfolio consisting of energy-related pipelines and liquid and bulk terminalling facilities. It operates through two segments: Pipelines and Terminals. The Pipelines segment consists of trans mountain, Cochin, puget sound and jet fuel pipeline systems. The Terminals segment includes Vancouver wharves terminal facilities located in western Canada that provide merchant storage as well as rail terminals offering loading and delivery services for liquids products. The company was founded on April 7, 2017 and is headquartered in Calgary, Canada.

Publicly traded companies mentioned herein: Kinder Morgan Canada Ltd (KML CN), Kinder Morgan Inc (KMI)

Highlights

The presenter is long shares of Kinder Morgan Canada (KML CN) following its lackluster IPO (May 30, 2017). The Canadian unit of Kinder Morgan (KMI) was spun-off to help finance the Trans Mountain pipeline, and was originally projected to trade in the C$19-22 range. However, due to political risks stemming from the recent elections in British Columbia (BC), the stock opened at ~C$17 and promptly dropped to the C$16 range. In addition to owning KML, the presenter owns KMI and thinks the Trans Mountain project will proceed. The risk/ reward is favorable, in his opinion, and the risks for KML - and KMI, to a lesser extent - are likely to be resolved given Prime Minister Trudeau’s support for the Trans Mountain pipeline and the importance of this project for Alberta’s oil sands producers (it represents a meaningful capacity expansion and would allow Canada to increase its exports to Asia). Based on KML’s assets, he views downside risk as limited to 11x ~C$400mm of future EBITDA (C$13/ share). However, the bulk of the future value depends on Trans Mountain, and if it proceeds as he expects, KML should generate distributable cash flow (DCF) of C$2.50/ share annually by 2020. At 12.5-13x this forecast, the stock is worth C$30+.

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