Wednesday, March 4, 2009

Inter Pipeline Fund 2

One negative thing to say right off on this stock is that there is insider selling and no insider buying on this stock (TSX-IPL.UN). The insider buying/selling reports look at the past year and during this past year, there has been insider selling mainly by the company officers and some director insider selling. A positive thing is that this company says that it will maintain its current distribution in 2010 and beyond despite becoming taxable in 2011. There is no indication that the distributions will be increased. The problem of becoming taxable is one that all Income Trust companies share at this time. I have updated my spreadsheet with more estimates today.

Now, I will look at the ratios on the spreadsheet to see if this stock is currently a good buying. The good things I see is that the yield is now 12%, and the 5 year average is only 9% and the P/E is currently at only 11% compared to the 5 year average of 15%. Also, the P/BV (Price/Book Value) Ratio is currently only 1.39 compared to the 5 year average of 1.65. However, I do note that the P/BV is higher than the 10 year average of 1.28. When looking at the Graham Price, the current price is lower than the one for 2008 of $11.30 and lower than the potential one of $8.61 if analysts are right about what the earnings would be in 2009. There is no guarantee than any suggested future earnings will be accurate. These are only estimates and analyst estimates tend to go lower in bear markets and higher in bull markets. So do not read too much into any estimates.

The next thing I want to note is that the Globe Investor site gives this stock a 4 star rating. The stock has stability ratings of SR-3 and STA-3M. Stability ratings are from 1 to 7, with 1 being the highest rating. This stock is considered a medium risk. In looking at the ratings for this stock, they range from Strong Buy to Hold, with lots of Hold ratings. However, the consensus rating is a Buy. (See my site for information on analyst ratings.)

As I said yesterday, no one expects the earnings and cash flows for 2009 to be a good as that for 2008. However, they do not slip much from 2006 and 2007 figures. What does concern me is low liquidity rating of .86. This means that current assets cannot cover current liabilities. The Asset/Liability Ratio is better at 1.38, but I would be more comfortable with this stock if these ratings were higher.

This fund has four lines of business: conventional oil pipelines, oil sands transportation, NGL extraction, and bulk liquid storage. Inter Pipelines have four petroleum pipeline systems in Alberta and Saskatchewan, transporting approximately 20% of western Canada’s conventional oil production. They have Canada’s largest oil sands gathering business. They are Canada’s largest ethane production business, processing over 40% of all natural gas exported from the province of Alberta. They do bulk liquid storage of petroleum and petrochemical in Europe and they are the largest independent storage provider in the United Kingdom. Its web site is See my spreadsheet on this company at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets on my web site.

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