Inter Pipeline

IPL-T

It has under performed. They made this transformational construction of this $3.3 billion petrochemical complex. There was a reverse of the pipeline of propane as they need it from the US to make plastic. He thinks it is incredible cheap and will show results in six months. Yield is 8.2% with a 75% payout ratio. Potential for a take out. (Analysts’ price target is $24.33)

He sold it a few months ago. Their new petrochem facility transforms Alberta propane into plastic pellets for consumer goods and industrial use. A good idea as Alberta lacks pipelines to move natural gas. $550 million EBITDA from comes this $3.5 billion plant when it comes online in 2021. That's good. However, IPL has been secretive about the plant's progress, and this plant exposes them to the risk of commodity price risk. To offset that, they need to close take-or-pay contracts with other producers of the end product, and IPL hasn't done that. Also, they have problems with storage terminals in Europe--not used to capacity.

All the pipelines have traded well this year. They're bond proxies. He's looking at defensives like this and he ranks IPL fourth among pipeline stocks. He likes pipelines because there's a finite number of them that will be valuable more in the future than now.

They have a lot of growth projects related to the Oil Sands, so he doesn't see growth. Not his favourite midstream name. He prefers ENB-T.

Pays a 7.65% dividend, but its earnings estimates are weak. They pay out more than they earn. That's a problem. This will trade sideways.

IPL vs. ENB He likes both and owns four in his portfolio. ENB pays a higher yield at 5.95% and has had a nice rebound. He likes pipelines for cash flow. ENG pays a slightly higher rate of return. There's little risk in buying pipelines, because we're not building them. He prefers ENB.

It was his largest holding, then got out of it when it ran up too high. Their strength was always having major take-or-pay contracts to take oil out of the oil sands, from where he expects more oil production. He also likes IPL because they're trying to build in pipeline-friendly areas, namely north-south in Alberta and not east-west to BC which opposes pipelines. They probably have a sustainable dividend. They've bought storage in the Danish to diversify and not be dependent on Canada. This will be a bumpy ride until the Transmountain pipeline is built, and this won't happen until there's a change in Ottawa.

Payout ratio is 60% of cash flow. Not much growth in the near term is expected. Earnings have been declining. Dividends are not likely to grow from here. Overall, he would look elsewhere. Yield 7.7%

Pays a steady 8% yield. Trades at price-to-AFFO at 8.2x. But they carry a lot of debt. Net debt to EBITDA is 4.6.x. This is moving sideways, so it's a good entry point.

It has a nice fat dividend yield. It is a mid-stream company in Alberta and are building a big new chemical plant there and it will restrain their cash flow for a couple of years. It has a bit higher debt level. He bought it for the dividend a long time ago. He thinks it will go sideways but hold its dividend.

Has longed it. It's the pipeline to the Oil Sands. They're getting into a natural gas processing plant, but that comes with an execution risk: can they do it? The plant will eat up a lot of resources at $3.5 billion, to be finish in 2021. Wait and see. Last quarter, they were in line and cash flow beat expectations. IPL is consistent, because they already have a pipe in the ground (there's no uncertainty). Healthy cash flow.

(A Top Pick Feb 07/18, Down 3%) Tremendous yield for the risk you're taking. (See his other comments on IPL this day.)

7.7% dividend yield at 60% payout ratio--sustainable? Often, a high yield means the market expects it be cut, but he doesn't think this will happen here. All pipeline yields are high. IPL has so-so growth and is quite oily. He prefers something geographically diverse of product diverse.

He owns other pipelines, like ENB. IPL is more midstream than Enbridge and other peers--a lower choice. IPL yields over 7% which is sutainable. Their last quarter was spotty; they had excess capacity in their pipelines (not full going into Alberta). Overall, a good company