Inter Pipeline (IPL.TO) Buy, Sell or Hold

Inter Pipeline (IPL.TO)

19.12

+0.28 (1.49%)

as of Nov 1, 2021, 8:00:00 pm Market Open.

777 watching

DON'T BUY

Headwinds when demands fall off. Average at best. He prefers companies with better pricing and opportunities to invest cashflows. When buying just for the dividend, bad things can happen.

HOLD

Brookfield has put a bid on IPL -- what will happen? Brookfield Infrastructure buys distressed assets, and they may raise their bid from $16.50 to $18. (A previous suitor offered $30 for IPL in 2019, and IPL rejected that.) IPL is doing a strategic review. IPL stock is now inching towards $18, but IPL will likely reject $16.50. Hold onto IPL and see how this deal plays out.

WATCH

The board recommended investors to not take the Brookfield offer. He believes Brookfield might sweeten the deal a little north of $18. A deal to watch.

PARTIAL SELL

The current Brookfield purchase offer The IPL board has 15 days to respond to the offer. He no longer owns this. This trades $1 more than the Brookfield offer. The key value in IPL is their heartland petrochemical growth project; he hopes IPL releases costs and profitability of this massive project which could drive the share price. Brookfield already owns almost 20% of IPL and has alluded to a higher offer price. If you hold IPL, maybe sell 20-25% in case the deal collapses or some shock happens, then wait for management has to decide on your next move.

DON'T BUY

Recovered quite nicely, but not to pre-pandemic levels. They're going ahead with their chemical plant, which has some risk. Better names in Canada like Keyera, TC Energy, Enbridge. Lower risk names that are priced at a bit of a premium, but have less execution risk.

WATCH

There were no material updates on their projects in Q3. This remains an execution story. If the project is built on time, there will be meaningful upside. Their balance sheet is a bit stretched. If they pull this off, it is an interesting buy. Higher risk.

HOLD

They have been hit hard. In 2008 these were the best performing sector. This year they have performed terribly. They are attractive given the dividend yields. He still owns some IPL-T. They cut their dividend and are working on a feed plant for recycled plastics. In the summer there was considerable insider buying. If you have it, consider it still a hold.

PAST TOP PICK

(A Top Pick Nov 18/19, Down 40%) Hurt by pandemic fear. Business is actually performing well. Financing is in question for their plant making more durable and recylable plastics. Temporary, though large, hiccup. Opportunity to average down.

DON'T BUY

Hold ENB and PPL instead, which have more robust cashflows and can sustain the dividend. Cut dividend, and still looking for partner for their chemical plant. Overhangs on the stock. Wouldn't add at current levels in this environment. Yield is 3.7%.

RISKY

Execution and funding risk. There are safer names like ENB and PPL. If they pull off this execution on time and on budget, there's meaningful upside. Balance sheet pretty levered. Not as cheap as peers. It can work, but it's a riskier play.

HOLD

His model price is $13.14, which is only 1.8% higher. He would look for opportunities down the road. It is fully valued right now. Don't buy or sell it here.

DON'T BUY

Prefers Enbridge, Keyera and others in pipelines. IPL had no choice but to cut their dividend to fund their ambitious projects. Selling their storage business in Europe, announced today, helps. There are safer, better dividend-paying stocks.

DON'T BUY

A very simple pipeline and tank business. They owned and followed it for a long time. They invested in turning oil to plastics. The demand for propylene that they will produce is hard to evaluate so they exited.

PAST TOP PICK

(A Top Pick Jul 16/19, Down 32%) They're completing their Heartland Petrochemical Project, still doing well, though the budget rose. The pandemic hit them at a bad time when their financing was overextended and some questioned their base business, but that business is actually performing better than expects. Their oil sands pipeline is just fine while their storage business in Europe is at all-time highs. There are a lot of catalysts here going forward though they cut their dividend. He continues to hold it and gently averages into it and would buy more if he retraces to past lows.

DON'T BUY

Attractive yield. Overhang on the stock is still to find a partner for a large chemical plant. She's happy instead to own ENB and PPL.

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