Tuesday, July 29, 2014

Inter Pipeline Ltd. 2

I do not own this stock of Inter Pipeline Ltd. (TSX-IPL, OTC-IPPLF). In 2008, a friend had asked me about this pipeline and I had no information on it, so I investigated it. It is a utility and I follow and have lots of utility stocks.

When I look at insider trading, I find no insider selling, but some insider buying at $1.7M at around 0.02% of the market cap. In other words, a relatively very small amount of buying is going on. However, there is recent insider buying at between $30 and $33 per share and that is a positive.

The company does not have stock options per se, but a number of stock options like vehicles called Deferred Share Rights, Deferred Unit Right, Options Unit Incentive, Rights Deferred Share Rights, Unit Appreciation Right and Options Unit Incentive Options. The outstanding shares were not increased in 2013 due to any sort of stock option. The CEO has shares worth $5.8M. The old chairman seems to still have shares worth around $132.3M.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.82, 14.30 and 16.78. The 10 year corresponding P/E Ratios are similar. These P/E Ratios are relatively normal for a utility. The current P/E Ratio is 29.59 based on a stock price of $34.62 and 2014 EPS estimate of $1.17. This stock price test suggests that the stock is relatively expensive.

I get a Graham Price of $14.31. The 10 year low, median and high median Price/Graham Price Ratios are 1.05, 1.14 and 1.32. These P/GP Ratios are relatively normal for a utility. The current P/GP Ratio is 2.42. This stock price test suggests that the stock is relatively expensive.

The 10 year Price/Book Value per Share Ratio is 2.03. This is a relatively normal value for a utility. The current P/B Ratio is 4.45 a value some 120% higher. This stock price test suggests that the stock is relatively expensive.

The 5 year median dividend yield is 5.75%. This is a little high for a utility. The current dividend yield at 3.73% is some 35% lower. It was expected that old income trusts would end up with dividend yields in the 4 to 5% range and this stock has a dividend yield lower than this. I cannot test against the historical dividend yields because they are very high due to the fact that this stock used to be an income trust company.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus recommendations would be a Buy. The 12 month stock price consensus is $32.70. This implies a total loss of 1.82% with a capital loss of 5.55% and dividends at 3.73%. Obviously, the stock price is moving faster than analysts' recommendations.

The site of Sys-Con Media talks about IPL completing the first phase of Polaris Pipeline Expansion in July 2014. A recent article in the Financial Post talks about a $100M expansion of the Saskatchewan system.

Sound bit for Twitter and StockTwits is: currently overpriced. It would seem to me that this stock is currently relatively quite expensive. Personally, I would want them to get there Liquidity Ratio under control before I would want to invest in this stock.

However, if I owned this stock I would not sell just because it is overpriced. If you hold stocks for the long term they go from being overpriced to being underpriced and back to being overpriced. I would still worry about the Liquidity Ratio. See my spreadsheet at ipl.htm.

This is the second of two parts. The first part was posted on Monday, July 28, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

Inter Pipeline is a major petroleum transportation, natural gas liquids extraction, and bulk liquid storage business based in Calgary, Alberta, Canada. Structured as a publicly traded limited partnership, Inter Pipeline owns and operates energy infrastructure assets in western Canada, the United Kingdom, Germany and Ireland. The company is a limited partnership, not an income trust. Its web site is here Inter Pipeline.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

1 comment:

  1. IPL has been great for me.
    Picked up a significant holding on 2003 @ $6.90 and again in 2011 @ $15.00. Paying divs of > 18% on initial COP.
    Basically my divs have paid the COP because of the long period I have held them