BCV Bulletin - Recent Trading Activity - November 4, 2024
SELL: TC Energy Corporation (TSX: TRP)
We have fully exited our position in TC Energy Corporation (“TRP”). The company’s natural gas pipeline business has performed well and construction of new projects, such as Southeast Gateway, are progressing on-time and on-budget. The spin-off of South Bow Corporation has also been completed successfully. Year to date, the stock has performed well, returning 37%, which in part has been driven by a narrative based on connecting natural gas-fired energy generation to United States data centers – a narrative we feel is now largely priced in. As such, we have allocated this capital to comparable securities, with more attractive valuations, stronger balance sheets, and growth prospects.
BUY: Pembina Pipeline Corporation (TSE: PPL)
Pembina Pipeline Corporation (“PPL”) is a large, integrated, North American energy transportation and midstream service provider that gathers, processes, transports, markets, and exports hydrocarbon gas and liquids. The large majority of PPL’s earnings are secured by long-term contracts, and importantly, the company has considerably less debt relative to its larger pipeline peers – providing it flexibility to take advantage of a variety of growth opportunities and/or acquisitions, which would be in addition to self-funded growth of an anticipated 6% or greater over the coming years. PPL has a long history of conservatism, operational excellence, a sustainable dividend payout ratio, and high-quality management. While the company’s earnings are somewhat less contracted than TRP and is thus moderately more exposed to commodity and volume volatility, when considered in conjunction with growth prospects, superior free cash flow generation, and a stronger balance sheet, PPL presents a more compelling risk/reward opportunity over the long-term.
BUY: AltaGas Ltd. (TSE: ALA)
BCV has added to its position in AltaGas Ltd. (“ALA”). ALA is a Canadian-based natural gas midstream and natural gas distribution utility, with assets in both Canada and the United States. ALA’s utility business has industry leading growth prospects, while its midstream operations also present considerable growth opportunities. The majority of its asset base is regulated and/or contracted, and importantly, its midstream assets are fully integrated from well-head to West-coast export terminals – providing its customers access to attractive Asian markets. The company’s earnings and cash flows are expected to grow meaningfully over the next several years, while the company itself appears discounted relative to both midstream/pipeline and utility peers, particularly when considering valuation and growth metrics simultaneously.
This BCV Bulletin is intended for residents of the provinces and territories in which we are registered, is not meant to be a solicitation to any persons not resident in those jurisdictions and does not constitute an offer to buy or sell our products or services. Any opinions expressed are just that and are subject to change. Information is provided on a best-effort basis and its accuracy cannot be guaranteed. Information may also be provided from third party sources which are believed to be reliable, but we do not guarantee its accuracy or completeness. Certain statements may contain forward-looking statements, which involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. This BCV Bulletin has been prepared for general informational purposes only, is not intended as investment and/or financial advice on any subject matter and the securities mentioned should not be construed as a recommendation for any specific securities. ©BCV Asset Management Inc. 2024.
