AltaGas Services Ltd. (ALA-T)

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bpither
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Re: AltaGas Services Ltd. (ALA-T)

Post by bpither »

Any comments on the quarterly result and 4.3% dividend increase today? Market seems "to like it" whatever that means ... stock up 2.4% so far this morning. Benignly interesting for me - enough of an income boost for two senior tickets to a movie and popcorn
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Re: AltaGas Services Ltd. (ALA-T)

Post by AltaRed »

As I noted in the dividend increase thread.... stupidity increasing the dividend. All that extra cash being paid out to subscription receipts that might be purchased back next Spring, if/when the acquisition falls through.

An expensive way to shore up the share price BUT could also be a signal of the confidence the company has in the deal closing, in which case that might be a reason for the market to like it. Hope that is the real reason rather than an addiction to yield.

Added later: Didn't respond to Q3 result question. Results were in the right direction as expected, but major boost was frac spread received and power sold over previous quarters. Will the frac spread continue?
Last edited by AltaRed on 19 Oct 2017 14:48, edited 1 time in total.
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Re: AltaGas Services Ltd. (ALA-T)

Post by shellybear »

Well Alta Gas stated they would likely raise the divvy in the upcoming Q, but i really didnt think it would happen, given the nat gas pricing etc.
But they have a history of doing what they say they are going to do , so should not really be a surprise. It appears the street is a bit surprised given the bump in price today.
I of course sold my Alta Gas , after buying in around the bottom , 27.80 , and collecting one divvy and then selling for a profit.
Now kind of wishing i had kept some.... not the first time i have made this mistake...
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Re: AltaGas Services Ltd. (ALA-T)

Post by Dudsy »

IF the WGL acquisition closes, Altagas expects dividend growth of 8 - 10% per year from 2019 through 2021. That's a dividend yield of 9.5% to 10% in 2021 on today's price.

Just from today's press release, regarding WGL Approvals:

Approved so far:
- shareholder, FERC, Federal Trade Commission, Dept of Justice and CFIUS (Committee on Foreign Investment)

Outstanding:
- SCC of Virginia (on or about Oct 20)
- PSC of Maryland (around Dec 5)
- PSC of DC (first half of 2018)
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Re: AltaGas Services Ltd. (ALA-T)

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Dudsy wrote: 19 Oct 2017 11:29 IF the WGL acquisition closes, Altagas expects dividend growth of 8 - 10% per year from 2019 through 2021. That's a dividend yield of 9.5% to 10% in 2021 on today's price.
Yeah, but it most likely won't be that way if the acquisition closes. Share price may bounce back to the $40 range by the end of 2018 and yield will fall back to more normal 5% levels that utilities and pipelines more broadly pay.
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Re: AltaGas Services Ltd. (ALA-T)

Post by Dudsy »

AltaRed wrote: 19 Oct 2017 11:51 Share price may bounce back to the $40 range by the end of 2018 and yield will fall back to more normal 5% levels that utilities and pipelines more broadly pay.
$55 at 5%

However, their payout ratio is too high to hit that kind of yield
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Re: AltaGas Services Ltd. (ALA-T)

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My math says $43.80 would provide a 5% yield at $2.19/share, which is still on the high side for a utility, albeit in the ballpark for midstream. Anyways, I agree payout/yield is still too high at those levels and not sure why they'd keep paying that, and why they would continue with monthly payments versus quarterly. We may see some changes coming post-acquisition.
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Re: AltaGas Services Ltd. (ALA-T)

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AltaRed wrote: 19 Oct 2017 15:17 My math says $43.80 would provide a 5% yield at $2.19/share, which is still on the high side for a utility, albeit in the ballpark for midstream. Anyways, I agree payout/yield is still too high at those levels and not sure why they'd keep paying that, and why they would continue with monthly payments versus quarterly. We may see some changes coming post-acquisition.
My math was based on their promise of 8-10%/yr dividend growth for 2019-21. $2.84 divi in 2021.
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Re: AltaGas Services Ltd. (ALA-T)

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Dudsy wrote: 19 Oct 2017 15:25 My math was based on their promise of 8-10%/yr dividend growth for 2019-21. $2.84 divi in 2021.
That is a long ways off... I'd be pleased to see a $40 stock price by end of 2018 (as I noted earlier).
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Re: AltaGas Services Ltd. (ALA-T)

Post by Taggart »

It could be that management is seeing something positive down the road that the ordinary investor isn't. I haven't delved into their financial statements, but taking a quick peek at Morningstar, it appears that the company is reporting free cash flow for the first time in well over five years.
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Re: AltaGas Services Ltd. (ALA-T)

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Every year they have added to their cash flow generation, most of it on a COS take-or-pay basis. Cash flow generation is now getting big enough to escape being a fringe player (and be profitable). I think they believe the WGL purchase will provide a step change in predictable cash flow to allow them to generate growth elsewhere in their upstream busines. Hence why it is best to hold on to ALA shares until at least WGL post-acquisition.
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Re: AltaGas Services Ltd. (ALA-T)

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Thought I revive this post after last week's 10+% drop. The merger is on track, the numbers ... well they LOOK improved so big question mark around the stock going south. Any enlightened comments?
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Re: AltaGas Services Ltd. (ALA-T)

Post by newin96 »

Personally, I believe the drop was a result on a weak analyst call.
They handled the 2018 40% increase in EBITDA (mentioned in previous analyst call) to the now forecasted 25-30% increase poorly. The analyst kept asking, they kept stating they answered it already (but from the analyst perspective they didn't).
The decision not to sell the California assets (positioned as a change in the California market driving increased growth opportunities- and NOT because they couldn't get the price expected) created questions on what other assets they'd sell or how to finance the WGL acquisition. I believe the analysts didn't accept that premise (if the California business opportunity is that favorable - monetizing it via selling should have been possible).
I'm currently waiting on price stabilization prior to increasing my position.
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Re: AltaGas Services Ltd. (ALA-T)

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bpither wrote: 04 Mar 2018 08:42 Thought I revive this post after last week's 10+% drop. The merger is on track, the numbers ... well they LOOK improved so big question mark around the stock going south. Any enlightened comments?
They have been growing their numbers, but to me, they look and feel disorganized. Think the year long wait (plus another 5-6 months to go) for WGL to close (or not) is weighing on their ability to be confident and clear in their strategic direction.

As from their most recent financials, I took a look at their January presentation on their website and wow... what a busy, detailed, unfocused presentation. It looks like something a 'junior' company would put together. That does not inspire confidence. Neither does their continued insistence on using non-GAAP measures front and center, and their continued monthly distributions. They seem to be acting like an income trust from the old days.

That said, if one takes the time to look through their unsophisticated and novice approach to the street, I think they have a solid base of regulated and cost of service assets that will do well. It is a question of waiting and obviously some shareholders are tired of that... and are bailing. I see no reason to bail. This company should look a lot more confident and energetic come Fall 2018.
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Re: AltaGas Services Ltd. (ALA-T)

Post by snowback96 »

Wow, a 9.26% yield! How sustainable is that?
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Re: AltaGas Services Ltd. (ALA-T)

Post by OptsyEagle »

snowback96 wrote: 04 Mar 2018 23:31 Wow, a 9.26% yield! How sustainable is that?
As sustainable as when it was a 6% yield on a $36 stock. Why would a decline in the stock price make a dividend more or less sustainable?
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Re: AltaGas Services Ltd. (ALA-T)

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OptsyEagle wrote: 05 Mar 2018 10:13 Why would a decline in the stock price make a dividend more or less sustainable?
Try reversing cause and effect. The decline in the stock price is the result of lack of confidence in the dividend by the market. May or may not be correct of course.
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Re: AltaGas Services Ltd. (ALA-T)

Post by bpither »

Wow, a 9.26% yield! How sustainable is that?
which is why buying the receipts - if you want a piece of the business - is the way to go. The merger goes through and they'll exchange the receipts for the common. If it doesn't you'll get $31 back. I have half and half for a combined 1.5% of my entire portfolio under the heading "the riskier stuff". Altagas, a company which has raised their dividend every year since ending its income trust status, is at least merging with a company which has raised their dividend every year since 1977. That's a good sign although not the definitive one as the debt question in a rising interest rate is the fly in the ointment.
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Re: AltaGas Services Ltd. (ALA-T)

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bpither wrote: ,,,which is why buying the receipts - if you want a piece of the business...
Currently a ~7% premium to go this route. Quite the spread.
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Re: AltaGas Services Ltd. (ALA-T)

Post by JaydoubleU »

Totally speculative, but what do you think would be the outcome if ALA were to call off the WGL deal now?
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Re: AltaGas Services Ltd. (ALA-T)

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"We have two classes of forecaster: Those who don’t know and those who don’t know they don’t know.” John Kenneth Galbraith
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Re: AltaGas Services Ltd. (ALA-T)

Post by AltaRed »

Indeed it is, but self-inflicted with their dividend increase last Fall (as I have said at least a few times). Any company which does not have a substantial cash cushion to manage 'what ifs' regarding an acquisition, or pay higher interest on debt, deserves to be taken out to the woodshed. That said, there is no reason for them to not be able to get through 2018 on a cash flow basis, and bring on more cash flow each year with their capital investments.

The Seeking Alpha article did not address any future growth from their capex program. Investors need to work through that themselves. Per my prior post, one really needs to go through their January 2018 investor presentation on their website.
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Re: AltaGas Services Ltd. (ALA-T)

Post by OptsyEagle »

newin96 wrote: 06 Mar 2018 06:57
bpither wrote: ,,,which is why buying the receipts - if you want a piece of the business...
Currently a ~7% premium to go this route. Quite the spread.
The common stock is definitely suffering from not only the points laid out in the SA article, which was a rehash of any analysts comments from Q4 results, but is also suffering from the Arbitrage caused by the existence of the receipts. If one was looking at this stock as a bargain buy, I can certainly see why they might prefer the receipts over the common. Secondly, for the same reasons, you would be getting people selling the common and buying the receipts and last but not least, tax loss selling. Now I am not convinced that this allows a person to avoid the superficial loss rules, but I imagine that many investors probably think it does. Keep in mind that the last few years for stocks has been great. We also know that quite a few investors definitely sold something in the first few weeks of February and from the performance of the stock markets before that we can assume a lot of them will have realized a taxable capital gain. Many of those investors would be looking for a capital loss to offset that and if they did not look at the superficial loss rules real close, they might feel that ALA is the perfect candidate to create this perfect loss. They would then sell the common and buy the receipts.

Anyway, the question is not really, what has happened. The important question is what will happen. Is this phenomenon done or will it still be ongoing. Tough to say, but as you did say, I doubt that 7% premium is not getting noticed by all these same investors. I suspect that would pay for most of the things I discussed, but that is just my opinion, and right now, it seems to be a very lonely opinion.
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Re: AltaGas Services Ltd. (ALA-T)

Post by 2 yen »

https://ca.finance.yahoo.com/news/altag ... 24676.html

Finally, a little bit of good financial news for Altagas. They have a long way to go, but it's a step in the right direction IMHO.

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Re: AltaGas Services Ltd. (ALA-T)

Post by newin96 »

Anyone else waiting for their ALA.R (receipts) to show up as ALA shares?
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