Raising Pembina’s FVE, but the Stock Still Looks Overvalued
We are slightly raising our fair value estimate for Pembina Pipeline to CAD 37 from our previous estimate of CAD 36. The increase was driven by movement in foreign exchange rates. Accordingly, we are maintaining our $29 U.S.-denominated fair value estimate. Despite the increase in our fair value estimate, the stock continues to look overvalued. We believe that the market is overvaluing the company’s growth portfolio, as we expect future tolls to be discounted from current rates. Future, uncommit...Pembina Pipeline has four operating segments: conventional pipelines business, which is a tariff-based operation consisting of pipelines and related facilities that deliver crude oil and natural gas liquids; oil sands and heavy oil business, which consists of the Syncrude Pipeline, the Cheecham Lateral and the Horizon Pipeline; midstream and marketing business, which consists of Co.'s direct and indirect interest in a storage operation, its direct interest in terminals, storage and hub services under a mixture of short, medium and long-term contractual arrangements; and gas services business which consists of natural gas gathering and processing facilities.
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