Pacific Northern Gas up nearly 4% as Credit Suisse keeps Neutral rating, $30 target price
Credit Suisse reiterated a Neutral rating and $30 target price on Pacific Northern Gas Ltd. (PNG.TO) after its Q4 result and significant special dividend announcement.
Preliminary earnings results: "Pacific Northern Gas ( PNG ) reported Q4 2010 diluted earnings of C$1.06 which was below our C$1.12 and that of the Streets at C$1.07 and within the C$1.04 to C$1.16 range. The difference was largely below the operating margin line which is challenging to asses as we await the full financial release. PNG announced a C$3.00/shr special dividend on top of the regular C$0.30/shr quarterly dividend to be paid on 24 March 2011 to shareholders of record at the close of 15 March 2011. In light of weather related impacts from PNG's natural gas distribution utility, the earnings dispersion among the quarters can often be considerable. Yet, that dispersion does not generally impact allowed returns and full year earnings. Moreover, the long-cycle nature of most of our coverage universe, we do not place undue emphasis on quarterly results."
Details on dividend: "The C$3.00/shr special dividend is roughly fifty percent of the net proceeds from the initial payment of C$30m from the sale of PNG's interest in the Pacific Trail Pipelines Limited Partnership which closed on 2 March 2011. The company stated "PNG believes that it stands to benefit from the LNG industry...PNG believes there is room in Kitimat for more LNG terminals, and room for additional pipelines along the corridor." We share a similar view on potential for further LNG developments."
Investment thesis: "We believe Pacific Northern Gas provides low-growth infrastructure exposure with some growth opportunities involving further expansion of natural gas exports from Western Canada to Asian markets."
Valuation: "Our Neutral rating and target price of C$30 is obtained from multiple valuation methods, including: a P/B multiple of 1.1x; a 14.5x P/E multiple; a 7.6x EV/EBITDA multiple on 2012 estimates; and, a DCF. We reiterate our Neutral rating."
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