Inter Pipeline Fund

I was asked to talk another look at this stock (TSX-IPL.UN). The timing is good, as the financials for December 2008 has just been published. This is also a stock I follow; however, I do not own any. Today I will review how this stock has done in the past. Tomorrow I will look at it now and for the future.

All my following figures are for the year ending at the last annual statement of December 2008. The revenue growth for the last 5 and 10 years was 47% and 31% per year. The 5 and 10 years growth for Earnings per Share (EPS) was 53% and 28 % per year. The 5 and 10 year figures for cash flow is 25% and 7% per year. This stock had a very good year for cash flow and earnings in 2008. However, no one seems to feel that this company can match these figures for 2009. The Return on Equity (ROE) is very good also for 2009 at 22% where the 5 year average is only 8.6%.

The dividend or distribution growth for the last 5 and 10 years was 3.1% and .87% per year. The 10 year growth is not good. The 5 year growth is not bad considering it is an income trust. This growth is above background inflation. The closing price growth for the last 5 and 10 years was 8.6% and 13.7% per year. Any growth over 8% is just fine. This stock has been hit by the recent bear market, and it has lost some 25% of its value.

What I do not like is that the Liquidity (Current Asset/Current Liability Ratio) is only .86. This value has been declining over the last 5 years and I would prefer, especially since we are in a bear market, that this ratio be higher. The Asset/Liability is better, but not great at 1.38. This ratio has also fallen as it has a 5 year average of 1.92. The other things I do not like are that the Accrual Ratio is very high at 13.15% where any ratio above 5% is very high and the book value is declining, not growing. It is an income trust and they tend to pay out good distributions, and not grow their book values, but 5 and 10 year negative growths are 3% and 5% per year. I would like these values to be closer to 0%.

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 www.interpipelinefund.com. See my spreadsheet on this company at www.spbrunner.com/stocks/ipl.htm.

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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.