Author Topic: KMI - Kinder Morgan  (Read 137211 times)

jay21

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Re: KMI - Kinder Morgan
« Reply #310 on: January 27, 2016, 06:03:16 AM »
This is from the conference call last week, Jan. 20

"So I think the real message here guys is we are self funding now. Okay. And I got to tell you that to me that's a big relief, nobody is affected any more than I was by the division cut. Okay. But the point is we are building a very solid, stable, balance sheet with the ability to return an awful lot of cash to our shareholders over the next few years."
 
Self-funding must mean something different at KMI.  If I claim to not increase my debt, i.e. self-funding my personal expenditures, and then go add $2B onto my credit card a week later, something isn't right.

Another gem from just a week ago:

I believe that long term, the fact that we have no need access equity markets not just for ‘16, but for the foreseeable future and that we will self-fund our capital expenditures our growth capital should in the long run I think be a very solid underpinning to this company and we’re going to be able to return a lot more money to our shareholders in the long term as well as de-lever the balance sheet.

I got that they are refi-ing. In other words, little to no increase in net debt. That seems in line with what they are saying in their commentary.

I mean obviously maybe not, that's why I was asking what maturities they have in 2016.
@jay_21_


frommi

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Re: KMI - Kinder Morgan
« Reply #311 on: January 27, 2016, 06:32:24 AM »
Not if they have an increased capex program, if they do manage to grow, div growth will be weak.

Dividend growth will match DCF growth. And i am pretty sure that when the market values the equity at a higher price, that they than use equity capital to grow it even faster. But why should they talk about that now? Kinder is a pretty good capital allocator, so why the mistrust?

Palantir

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Re: KMI - Kinder Morgan
« Reply #312 on: January 27, 2016, 06:39:43 AM »
Div growth does not necessarily match dcf growth. The second par of your statement is wishful thinking, not analysis.
« Last Edit: January 27, 2016, 06:45:01 AM by Palantir »
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frankhkii

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Re: KMI - Kinder Morgan
« Reply #313 on: January 27, 2016, 06:45:44 AM »
There's three things KMI needs to do: 1) Build stuff 2) Grow dividends 3) Maintain leverage. If they do 2, they can't do 1 & 3. If they do 1 & 2, they can't do 3.

To model this out, keep one line item for DCF (Source of cash), one line item for Total Dividends (use of cash), and one for Growth Capex (use of cash). The balance is funded by debt (source of cash).

Or 4)Repurchase shares 5) Pay down debt. You analysis is too simplistic, its a long game.

I view yesterdays filing as a refinance not adding to the pile since ~$1.6B matures this year. Most of the capex number is for growth which results in more DCF in the future. They mentioned they are raising their internal hurdle rate for projects. I would imagine that calculation simplified is the current DCF yield on the equity and if it doesn't meet that I would hope they repurchase shares. These are good assets that will produce DCF for a long time so I'd much rather they repurchase shares than pay any dividend at all or raise it when the equity is at current levels.
« Last Edit: January 27, 2016, 08:56:12 AM by frankhkii »

Palantir

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Re: KMI - Kinder Morgan
« Reply #314 on: January 27, 2016, 06:48:45 AM »
Uh no, they do not need to repurchase shares.
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frankhkii

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Re: KMI - Kinder Morgan
« Reply #315 on: January 27, 2016, 07:07:23 AM »
Uh no, they do not need to repurchase shares.

Maybe not "need" but its what they should do. If they "need" to grow the dividend why would it not be a better alternative to repurchase shares at the current price? Basically it is not "needed' to (re)attract yield pigs into the name, sure it could provide an exit, but it is not needed. And if these assets will produce DCF long into the future at rising rates (in the long term), repurchasing shares makes the most sense at current prices.
« Last Edit: January 27, 2016, 07:27:58 AM by frankhkii »

frankhkii

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Re: KMI - Kinder Morgan
« Reply #316 on: January 27, 2016, 08:29:09 AM »
They're only 2 questions in on the analyst day Q&A but I would recommend you listen re buybacks at the current price, both questions so far have talked about it.

Palantir

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Re: KMI - Kinder Morgan
« Reply #317 on: January 27, 2016, 08:42:31 AM »
No, the better thing to do would be to suspend distribution and use everything either on capex or just hold it on their B/S. No point repurchasing shares at 9-10x Ebitda www they can build projects at 7x.
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frankhkii

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Re: KMI - Kinder Morgan
« Reply #318 on: January 27, 2016, 08:50:41 AM »
Yet you say they "need" to raise the dividend..??

Palantir

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Re: KMI - Kinder Morgan
« Reply #319 on: January 27, 2016, 04:41:10 PM »
Need to in order to be a good investment, but cannot accomplish it.
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