Keyera Corp.

Recommendation: Speculative Buy

Entry Date Symbol Recommendation Entry Price (CAD) Target 1 (CAD) Target 2 (CAD) Holding Duration Potential Upside
26 Aug, 24 KEY Speculative Buy CAD 40.4 CAD 44.84 CAD 47.53 42 days 17.6%

Fundamentals

  • Previous Close 43.87
  • Market Cap7392.48M
  • Volume152031
  • P/E Ratio25.60
  • Dividend Yield6.20%
  • EBITDA1023.32M
  • Revenue TTM6526.65M
  • Revenue Per Share TTM28.70
  • Gross Profit TTM 1175.78M
  • Diluted EPS TTM1.26

Data Powered by EOD Historical Data (“EODHD”).

Company Overview

Keyera Corp. engages in the gathering and processing of natural gas; and transportation, storage, and marketing of natural gas liquids in Canada and the United States. It operates through Gathering and Processing, Liquids Infrastructure, and Marketing segments. The Gathering and Processing segment owns and operates raw gas gathering pipelines and processing plants, which collect and process raw natural gas, remove waste products, and separate the economic components primarily natural gas liquids; and provides gas handling and other ancillary services, such as NGL extraction, NGL handling and loading services, and condensate stabilization services. The Liquids Infrastructure segment owns and operates a network of facilities, including underground NGL storage caverns, above ground storage tanks, NGL fractionation facilities, and NGL pipelines, as well as rail and truck terminals for the processing, fractionation, storage, and transportation of by-products of natural gas processing comprising ethane, propane, butane, and condensate. This segment also produces iso-octane; and engages in liquids blending activity, as well as provides processing, fractionation, storage, blending, and/or de-ethanization services to the Marketing segment. The Marketing segment engages in the marketing of propane, butane, condensate, and iso-octane, as well as natural gas and crude oil. The company was formerly known as Keyera Facilities Income Fund and changed its name to Keyera Corp. in January 2011. Keyera Corp. was founded in 2003 and is headquartered in Calgary, Canada.

Key Positives

Higher Cash from operations: CAD 398.0 mn in Q1 2024 vs CAD 311.4 mn in Q1 2023

Higher Adjusted EBITDA: CAD 314.3 mn in Q1 2024 vs CAD 292.1 mn in Q1 2023

Key Negatives

Lower Current Ratio: 1.08x in Q1 2024 vs 1.17x of Industry Median 

Higher Debt to Equity Ratio: 1.48x in Q1 2024 vs 0.39% of Industry Median

Key Investment Risks

Higher volatility in energy prices, Energy-related forward contracts, Interest rates, foreign currency exchange rates, etc.

Recommendation Summary

Technical Summary

Entry Price Support* Target 1 Target 2
40.4 34.2 44.84 47.53

Data Source: REFINITIV, Analysis: StockNextt

*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.

Key Reasons for Speculative Buy

1) Growth from Fee-for-Service Segments: The Liquids Infrastructure segment delivered record realized margin of CAD 137 million (Q1 2023 – CAD 119 million). The year-over-year increase is attributable to increased contributions from KAPS as contracted volumes continue to ramp up, and strong demand for the company's fractionation, storage, and condensate services. The G&P segment delivered realized margin of CAD 104 million (Q1 2023 –CAD 100 million) which includes the first full quarter contribution from the Pipestone gas plant expansion project.

 

2) Positive Long-term fundamentals: The company's outlook for basin volume growth is strong. This growth will be supported by the Trans Mountain Pipeline Expansion, LNG Canada, a growing Petrochemical industry and increasing NGL exports from the West Coast. The company's strategically located assets will continue to play an integral role in enabling this growth, which is a key positive.

3) An income play: The dividend pay-out practice translates into an essential factor for regular income-seeking investors with a long-term horizon. Moreover, at the last closing price of CAD 38.89 as on 22 July 2024, the stock offered a healthy dividend yield of 5.22%, which looks decent considering the current interest rates.

4) KEY depicts an upside of lower double-digit (in % terms) as per the EV to Sales based relative valuation method, which supports a 'Speculative Buy' recommendation.

Key Financials in Pictures

Income Statement

Balance Sheet

Change in Cash

Total Operating Cash

Dividends Paid

Data Powered by EOD Historical Data (“EODHD”).

Peer Comparison

Sector: Energy Industry: Oil & Gas Midstream

Company Change (CAD) Price (CAD) Trailing PE (x) Forward PE (x) Price Sales TTM (x) Price to Book Value (x) Enterprise Value to Revenue (x) Enterprise Value to EBITDA (x)
KEY
Keyera Corp.
0.15 0.34% 44.02 25.60 16.29 1.13 2.59 1.79 13.13
ENB
Enbridge Inc
0.35 0.63% 55.85 32.23 17.70 2.24 1.76 4.03 13.89
TRP
TC Energy Corp
0.75 1.23% 61.70 - 12.35 3.93 1.73 7.63 19.88
PPL
Pembina Pipeline Corp
0.38 0.66% 58.05 20.90 14.04 2.66 1.86 4.09 13.56
ALA
AltaGas Ltd
0.06 0.18% 34.05 13.46 12.90 0.60 1.14 1.30 10.63

Data Powered by EOD Historical Data (“EODHD”).

Disclosures:

Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are based on financial as well as technical parameters. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer :
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