In a July 22 research note, analyst Robert Catellier reported that CIBC increased its target price on AltaGas Ltd (TSX:ALA) to CA$21 per share from CA$20 due to "a stronger result on the distributed energy asset sale and in light of the solid progress on asset sales in general." The energy infrastructure company's current share price is around CA$20.71.
Regarding the former, AltaGas' sale of its distributed generation assets to TerraForm Power generated CA$940 million in proceeds and a 12x EBITDA valuation, "both higher than we expected," Catellier indicated.
Regarding the latter, on plan to garner CA$1.5–2 billion from asset sales, AltaGas has raised CA$1.3 billion. It should be able to achieve the last roughly CA$200 million in sales, added Catellier, and could simply do so by selling its remaining interest in AltaGas Canada. With sales of other assets in addition, the energy firm could exceed the CA$2 billion goal.
Catellier highlighted that "the company has struck a nice balance between the required urgency to remove the funding gap and remaining disciplined enough to achieve attractive valuations."
Partially offsetting some of the company's asset sale progress, however, is the near and medium-term impact of "surplus production leading to pressure on natural gas liquids prices and frack spreads," Catellier wrote. In light of those environmental factors, CIBC revised its estimates accordingly.
CIBC has a Neutral rating on AltaGas.