Author Topic: ENB - Enbridge  (Read 11315 times)

frommi

  • Hero Member
  • *****
  • Posts: 1113
Re: ENB - Enbridge
« Reply #50 on: October 11, 2018, 10:03:05 PM »
I think your numbers are a bit off. I do not believe that ENB leverage is 6.4x EBITDA. n their investor presentation is is noted as being 5x, which does not include the preferred , which I think are roughly $7B CAD, so they would make around 5.6x all inclusive. Also note they ENB recently sold assets for 7B CAD. I think the picture gets clearer once the assets sales and the retructuring of the MLP subs is complete. Right now, at current prices  ENB DCF is around 4.35 CAD/ share, which translates into a 10%+ cash yield. ENB is also on track to increase  their DCF by 20% YoY.

KMI has a bit lower leverage, but I think their assets overall are of somewhat lower quality. For example about 15% of KMI cash flows are from the CO2 segment, which is an E&P in disguise and really deserves a 5x multiple only.

I own both KMI and ENB, but own more ENB. At current valuations, I prefer ENB over KMI. In fact, I added a few shares today.

It is even worth than previously calculated: (All numbers in CAD)

Long Term Debt: 59940
Short Term Debt: 1014+4779
Preferred: 7747
Redeemable noncontrolling interests: 4433
Minorities: 6100
-Cash: 622
Shares out: 1715

EV: 83391  + 1715*41.49 = 154546
EBITDA: 11476 (last 6 months annualized, added back Asset impairment)

EV/EBITDA: 13.46
Debt/EBITDA: 7.3

With the latest deal to take over the partnerships they will reduce my calculated leverage, but of course you have more shares outstanding after that deal. So its probably a wash for EV/EBITDA, because the partnerships also trade around 12x/EV/EBITDA right now. I can`t really see how they can afford to sustainable raise the dividend by 10% each year going forward. They were able to do so in the past because they increased the leverage each and every year. I wouldn`t be surprised if they have to slash the dividend if we get a tight credit market. KMI on the other hand has already gone through this and is able to fund its cashflow need internally. Please find my mistake, because i really want to invest here but the numbers don`t allow me to do it right now.


frommi

  • Hero Member
  • *****
  • Posts: 1113
Re: ENB - Enbridge
« Reply #51 on: October 12, 2018, 10:31:08 AM »
I think your numbers are a bit off. I do not believe that ENB leverage is 6.4x EBITDA. n their investor presentation is is noted as being 5x, which does not include the preferred , which I think are roughly $7B CAD, so they would make around 5.6x all inclusive. Also note they ENB recently sold assets for 7B CAD. I think the picture gets clearer once the assets sales and the retructuring of the MLP subs is complete. Right now, at current prices  ENB DCF is around 4.35 CAD/ share, which translates into a 10%+ cash yield. ENB is also on track to increase  their DCF by 20% YoY.

KMI has a bit lower leverage, but I think their assets overall are of somewhat lower quality. For example about 15% of KMI cash flows are from the CO2 segment, which is an E&P in disguise and really deserves a 5x multiple only.

I own both KMI and ENB, but own more ENB. At current valuations, I prefer ENB over KMI. In fact, I added a few shares today.

Looks like you are right, over the past 20 years ENB traded on average at 14x EV/EBITDA (KMI only at 12x, so it looks like the market gets the higher asset quality) and after they buy out the MLPs my calculated leverage is more normal again. Started a small position. Thanks!

Spekulatius

  • Hero Member
  • *****
  • Posts: 1743
Re: ENB - Enbridge
« Reply #52 on: October 12, 2018, 10:47:20 AM »
I think your numbers are a bit off. I do not believe that ENB leverage is 6.4x EBITDA. n their investor presentation is is noted as being 5x, which does not include the preferred , which I think are roughly $7B CAD, so they would make around 5.6x all inclusive. Also note they ENB recently sold assets for 7B CAD. I think the picture gets clearer once the assets sales and the retructuring of the MLP subs is complete. Right now, at current prices  ENB DCF is around 4.35 CAD/ share, which translates into a 10%+ cash yield. ENB is also on track to increase  their DCF by 20% YoY.

KMI has a bit lower leverage, but I think their assets overall are of somewhat lower quality. For example about 15% of KMI cash flows are from the CO2 segment, which is an E&P in disguise and really deserves a 5x multiple only.

I own both KMI and ENB, but own more ENB. At current valuations, I prefer ENB over KMI. In fact, I added a few shares today.

It is even worth than previously calculated: (All numbers in CAD)

Long Term Debt: 59940
Short Term Debt: 1014+4779
Preferred: 7747
Redeemable noncontrolling interests: 4433
Minorities: 6100
-Cash: 622
Shares out: 1715

EV: 83391  + 1715*41.49 = 154546
EBITDA: 11476 (last 6 months annualized, added back Asset impairment)

EV/EBITDA: 13.46
Debt/EBITDA: 7.3

With the latest deal to take over the partnerships they will reduce my calculated leverage, but of course you have more shares outstanding after that deal. So its probably a wash for EV/EBITDA, because the partnerships also trade around 12x/EV/EBITDA right now. I can`t really see how they can afford to sustainable raise the dividend by 10% each year going forward. They were able to do so in the past because they increased the leverage each and every year. I wouldn`t be surprised if they have to slash the dividend if we get a tight credit market. KMI on the other hand has already gone through this and is able to fund its cashflow need internally. Please find my mistake, because i really want to invest here but the numbers don`t allow me to do it right now.

Two errors- you added in the current portion of the long term debt, but it is included in the LT debt already. So you are double counting the $4.8 CAD in debt. Y2018 cash flow is $12.5 not $11.5B CAD.


Edit, just noticed that above is incorrect and the $4.8B CAD “current portion of LT debt“ needs to be added to the debt
« Last Edit: October 12, 2018, 03:36:15 PM by Spekulatius »
To be a realist, one has to believe in miracles.

Uccmal

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3698
Re: ENB - Enbridge
« Reply #53 on: October 12, 2018, 02:52:18 PM »
Frommi, .for what its worth your concerns are totally legit.  I have similar concerns and suspect concerns around liquidity are the reasons the stock is so cheap right now.  For me its a show me stock.  The other side of the coin is that it likely wont trade real low.  It has a huge moat of profitable transportation. 
GARP tending toward value

gokou3

  • Lifetime Member
  • Sr. Member
  • *****
  • Posts: 459
Re: ENB - Enbridge
« Reply #54 on: October 12, 2018, 03:09:47 PM »
Has anyone read the VIC write-up back in May 2018?  It was a short idea, and the main premise of the author is that ENB has underreported its maintenance capex and that the company would have negative FCF after dividends if they used the true maintenance capex instead.  He has been rebutted within that forum but I'd just like to know what others here think.

Spekulatius

  • Hero Member
  • *****
  • Posts: 1743
Re: ENB - Enbridge
« Reply #55 on: October 12, 2018, 03:27:53 PM »
Has anyone read the VIC write-up back in May 2018?  It was a short idea, and the main premise of the author is that ENB has underreported its maintenance capex and that the company would have negative FCF after dividends if they used the true maintenance capex instead.  He has been rebutted within that forum but I'd just like to know what others here think.

1) I have read it and I think the author has been mostly proven wrong. there was a detailed comment regarding that Adresse the ma8n thesis, that maintenance Capex is underreported. one can conclude from this that the author does not really understand the accounting and the balance sheet.

2) ENB was able to monetize assets for $7B CAD releaving pressure on thr balance sheet
3) ENB beat DCF projections
4) Line 3 replacement appears on track.

Nothing came to pass as predicted by the author.
To be a realist, one has to believe in miracles.

Uccmal

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3698
Re: ENB - Enbridge
« Reply #56 on: October 15, 2018, 05:26:54 AM »
Has anyone read the VIC write-up back in May 2018?  It was a short idea, and the main premise of the author is that ENB has underreported its maintenance capex and that the company would have negative FCF after dividends if they used the true maintenance capex instead.  He has been rebutted within that forum but I'd just like to know what others here think.

1) I have read it and I think the author has been mostly proven wrong. there was a detailed comment regarding that Adresse the ma8n thesis, that maintenance Capex is underreported. one can conclude from this that the author does not really understand the accounting and the balance sheet.

2) ENB was able to monetize assets for $7B CAD releaving pressure on thr balance sheet
3) ENB beat DCF projections
4) Line 3 replacement appears on track.

Nothing came to pass as predicted by the author.

Its number 4 that worries me most.  I will feel better about this once they get the Minnesota portion in the ground. 
GARP tending toward value