Author Topic: KMI - Kinder Morgan  (Read 136079 times)

sswan11

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Re: KMI - Kinder Morgan
« Reply #230 on: December 05, 2015, 07:06:55 AM »
http://www.barrons.com/articles/kinder-morgan-signals-possible-dividend-cut-1449293142?mg=id-barrons

Downside in the stock, now $17, seems limited. The shares, however, donít look like a bargain trading for about 17 times estimated 2015 earnings (based on generally accepted accounting principles), adjusted for a tax benefit, and for about 11 times projected 2015 Ebitda (earnings before interest, taxes, depreciation, and amortization). These arenít low multiples for a leveraged, capital-intensive business that is showing no growth in underlying cash flow. Electric utilities shares are slightly cheaper than Kinder Morgan and carry much less risk.


RRJ

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Re: KMI - Kinder Morgan
« Reply #231 on: December 05, 2015, 07:30:54 AM »
All good points to consider, folks.  My thinking is similar to thefatbaboon's below.  This probably takes a few years of cut dividends to right things.  Or they could sell off some assets to do it quickly.  Not ideal, but they do have options. 

thefatbaboon

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Re: KMI - Kinder Morgan
« Reply #232 on: December 05, 2015, 08:15:05 AM »
Sswan,
If the 5bn in dcf is accurate then I don't agree that this isn't cheap, even if it is zero growth.  its a 12.5% dcf yield. (I think one has to take into account ebitda to dcf conversion when comparing ebitda multiples across utilities)

It's interesting to compare the price Brookfield and Kmi just paid for the rest of ngpl.  They are paying a higher implied ev to ebitda multiple for this rather problematic asset than one can buy the whole of Kmi at as of Friday's market close.


Palantir

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Re: KMI - Kinder Morgan
« Reply #233 on: December 05, 2015, 10:22:23 AM »
http://www.barrons.com/articles/kinder-morgan-signals-possible-dividend-cut-1449293142?mg=id-barrons

Downside in the stock, now $17, seems limited.

Why though? People invest in MLPs for the dividend, and if the dividend is cut, there will be shareholder turnover. This has gone from a 10% dividend growth stock to a dividend cut. At some point this will be a value, but why get into this stock before the market digests the dividend growth story?

Putting a 9% target yield (which I see as fair for a 0% growth company) after assuming a 50% dividend cut gives me a FV of $11/share.
« Last Edit: December 05, 2015, 10:27:58 AM by Palantir »
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scorpioncapital

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Re: KMI - Kinder Morgan
« Reply #234 on: December 05, 2015, 10:37:51 AM »
If I put a 9% dividend yield on every stock in the S&P500, I think every stock would have to drop by 1/2 to 2/3s.

ccplz

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Re: KMI - Kinder Morgan
« Reply #235 on: December 05, 2015, 12:40:27 PM »
The company expects ebitda of around 7.3bn and ebda of 8.2 in 2015. Both seemed well on track in q3. (The main difference between the two is g&a is excluded from ebda).  The company turns nearly 70% of ebitda into dcf. (That's high like a tobacco company)


Even if we assume they can achieve 7.3 bn in EBITDA, how did you get the 70% conversion from EBITDA to (what I'm assuming to be) FCF?

Capex run rate is around 3-4 bn, so that's a 60% conversion at most? And tax is a real cash expense.

thefatbaboon

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Re: KMI - Kinder Morgan
« Reply #236 on: December 06, 2015, 04:33:43 AM »
Rrj,

What do you think of possibility of them introducing a scrip dividend. With an undertaking by insiders and perhaps a couple of larger investors to take all scrip for a few years?

CorpRaider

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Re: KMI - Kinder Morgan
« Reply #237 on: December 06, 2015, 05:34:16 AM »
Yeah thought they might consider bringing back a kmr/scrip dividend option.

ScottHall

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Re: KMI - Kinder Morgan
« Reply #238 on: December 06, 2015, 08:41:54 AM »
The company expects ebitda of around 7.3bn and ebda of 8.2 in 2015. Both seemed well on track in q3. (The main difference between the two is g&a is excluded from ebda).  The company turns nearly 70% of ebitda into dcf. (That's high like a tobacco company)


Even if we assume they can achieve 7.3 bn in EBITDA, how did you get the 70% conversion from EBITDA to (what I'm assuming to be) FCF?

Capex run rate is around 3-4 bn, so that's a 60% conversion at most? And tax is a real cash expense.

People like to say this, but it's often not true. I wouldn't be surprised in KMI's case if the present value of its tax liabilities are so small that they effectively round to zero, using a reasonable discount rate.
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RRJ

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Re: KMI - Kinder Morgan
« Reply #239 on: December 06, 2015, 09:32:50 PM »
Rrj,

What do you think of possibility of them introducing a scrip dividend. With an undertaking by insiders and perhaps a couple of larger investors to take all scrip for a few years?

I hadn't thought of that but something like that might accomplish two goals at once.  I'll admit I'm not quite sure how that would work so I'll research how it was used for KMR.  I think that's what another poster mentioned.