AltaGas Services Ltd. (ALA-T)

Discuss your favourite picks, broker, and trading or investment style.
User avatar
ThinkDividends
Silver Ring
Silver Ring
Posts: 509
Joined: 02 Dec 2009 00:07
Location: Toronto, Ontario

AltaGas Services Ltd. (ALA-T)

Post by ThinkDividends » 09 Nov 2010 14:53

scomac wrote:I have in the past with Alta Gas and I will again in the future when confronted with these sorts of shenanigans.
What AltaGas shenanigans ???

[Split out from viewtopic.php?f=33&t=110764 by ModeratorI]
Last edited by Peculiar_Investor on 07 Feb 2014 07:04, edited 1 time in total.
Reason: replace old domain name with www.financialwisdomforum.org to reflect new domain name effective 19-Jan-2014
Patiently building wealth one dividend increase at a time…

User avatar
scomac
Gold Ring
Gold Ring
Posts: 5918
Joined: 19 Feb 2005 09:47
Location: The Greenbelt

Re: Toromont (Symbol-TIH)

Post by scomac » 09 Nov 2010 16:34

ThinkDividends wrote:
scomac wrote:I have in the past with Alta Gas and I will again in the future when confronted with these sorts of shenanigans.
What AltaGas shenanigans ???
Around 2007 they spun out Altagas Utility Group at the rate of 7 shares per 100 trust units. The assets were largely a maritime NG distribution network. Nothing wrong with the asset, just that it traded by appointment, paid a meagre dividend -- too small a position on its own without buying a lot more with little incentive to do so. ALA took the spin-off back in privately at $9/share early this year which was a huge premium to market for something that was spun out at a book value around $7.50/share three years earlier. Explain to me how this is maximizing my shareholder value? Somebody made out like a bandit though by putting the assets in the public place and accumulating them very cheaply to subsequently sell them back to the parent at a big premium. From a company perspective, these machinations make little sense -- essentially giving assets away at one price and then buying them back some time later at an even higher price. These antics do nothing for the company, but it certainly has the potential to enrich a few well positioned shareholders. :evil:
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830

User avatar
ThinkDividends
Silver Ring
Silver Ring
Posts: 509
Joined: 02 Dec 2009 00:07
Location: Toronto, Ontario

Re: Toromont (Symbol-TIH)

Post by ThinkDividends » 09 Nov 2010 17:09

scomac wrote:Around 2007 they spun out Altagas Utility Group at the rate of 7 shares per 100 trust units. The assets were largely a maritime NG distribution network. Nothing wrong with the asset, just that it traded by appointment, paid a meagre dividend -- too small a position on its own without buying a lot more with little incentive to do so. ALA took the spin-off back in privately at $9/share early this year which was a huge premium to market for something that was spun out at a book value around $7.50/share three years earlier. Explain to me how this is maximizing my shareholder value?
If I remember correctly, ALA wasn't allowed to have the regulated utility business under the income trust structure. When they decided to convert back to a corp, they bought Altagas Utility Group back.

On the other hand, ALA management held a lot of Altagas Utility Group shares and made a lot $$$ on the takeover.
Last edited by ThinkDividends on 10 Nov 2010 08:05, edited 1 time in total.
Patiently building wealth one dividend increase at a time…

User avatar
scomac
Gold Ring
Gold Ring
Posts: 5918
Joined: 19 Feb 2005 09:47
Location: The Greenbelt

Re: Toromont (Symbol-TIH)

Post by scomac » 09 Nov 2010 22:34

ThinkDividends wrote: If I remember correctly, ALA wasn't allowed to have the regulated utility business under the income trust structure. When they decided to convert back to a corp, they bought Altagas Utility Group back.
My memory is pretty hazy when it comes to the details, so I went back to check on this as I had no recollection of the above. Sure enough, I was only off by about two years on when the spin-out occurred -- Nov. 17, 2005 at a rate of 1 per 14 and a price of $7.50.

The original press release announcing the spin-out of Altagas Utility Group makes no mention of satisfying regulatory concerns, however the CEO does emphasize the following:
David Cornhill, Chairman and CEO of AltaGas remarked “The new company will generate solid
performance from its utility businesses, and the build out to new natural gas users in Heritage Gas’
franchise areas provides future growth for the new corporation.” He went on to say that “The
separation of the investment in AltaGas Income Trust into two investments is expected to enhance
unit holder value.”
Almost four years later, on Aug. 17, 2009, ALTAGAS INCOME TRUST AGREES TO MAKE OFFER TO ACQUIRE
REMAINING 80.2 PERCENT OF ALTAGAS UTILITY GROUP INC.

The Offer represents a 45 percent premium based on the $6.25 closing price of Utility Group common shares on
August 14, 2009 and a 21 percent premium to the price at which Utility Group was spun out by the Trust in
2005. The acquisition is valued at approximately $200 million, including assumed debt expected to approximate
$130 million, and represents approximately 1.15 times the expected combined regulated rate base. The
estimated $59 million cash required to close the transaction will be funded by existing credit facilities.

“The Utility Group acquisition is an outstanding strategic fit for AltaGas,” said David Cornhill, Chairman and CEO
of the Trust. “Utility Group’s steady, measured approach to doing business parallels AltaGas’ strategy of
investing in energy infrastructure that provides long-term, stable cash flow and solid returns. Adding Utility
Group’s investments, people and growth opportunities to AltaGas expands, diversifies and strengthens our gas
division and overall business.”
You can decide for yourself if this is strategic planning at work predicated by regulators or a game of musical chairs that left many shareholders standing when the music quit playing and did absolutely nothing to further the underlying business.

Back to your regularly scheduled programming...
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830

User avatar
ThinkDividends
Silver Ring
Silver Ring
Posts: 509
Joined: 02 Dec 2009 00:07
Location: Toronto, Ontario

Re: AltaGas Services Ltd. (ALA-T)

Post by ThinkDividends » 10 Nov 2010 08:14

At the time of the spinout, Maureen Howe, an analyst at RBC Capital Markets stated the following:
Maureen Howe wrote:“Notwithstanding AltaGas’ tax efficient structure, AUI continues to pay corporate income taxes to avoid any reduction in its revenue requirement and customer rates. AUI’s decision to continue paying corporate income taxes flows from the AEUB’s August 2003 decision with respect to another utility, AltaLink. In its decision, the AEUB concluded that an allowance for income taxes should not be included as part of a utility’s revenue requirement when there was no reasonable expectation that they would likely be incurred. Given the AEUB’s decision, we believe there is very little benefit, if any, of holding AltaGas’ natural gas distribution business under an income trust structure as opposed to a corporate entity.”
The new corporation, AUI, assumed $60 million in debt from AltaGas at the time of the spinout.

Source: Maureen Howe, RBC Capital Markets, May 26, 2005
Patiently building wealth one dividend increase at a time…

marty123
Gold Ring
Gold Ring
Posts: 2950
Joined: 23 Feb 2007 13:36
Location: Ontario

Re: Toromont (Symbol-TIH)

Post by marty123 » 10 Nov 2010 08:24

ThinkDividends wrote:On the other hand, ALA management held a lot of Altagas Utility Group shares and made a lot $$$ on the takeover.
It's relative. An annualized return of 4.6% (+ meagre dividends) over 4 years is a lot compared to ALA's performance in the same period (ignoring the admitedly high distribution, ALA was down by half between 05 and 09), but it might not be excessive compared to other investments that these people could have made. The biggest mistake seems more that they divested the company away from what later proved to be an asset that significantly outperformed the core business.

2 yen
Gold Ring
Gold Ring
Posts: 2616
Joined: 09 Apr 2005 09:15

Re: AltaGas Services Ltd. (ALA-T)

Post by 2 yen » 03 Mar 2012 01:56

Having a brain fog moment....how would I classify ALA.TO in terms of sector and asset allocation?

Thanks.

User avatar
brad911
Gold Ring
Gold Ring
Posts: 1127
Joined: 29 Jan 2007 16:45
Location: London ON
Contact:

Re: AltaGas Services Ltd. (ALA-T)

Post by brad911 » 04 Mar 2012 12:26

I have it allocated to my energy sector exposure in the portfolio.
Triage Investing Blog - A Source for Value & Dividend Investing and Business Fundamentals

User avatar
Descartes
Gold Ring
Gold Ring
Posts: 1153
Joined: 03 Nov 2008 09:59

Re: AltaGas Services Ltd. (ALA-T)

Post by Descartes » 25 Mar 2013 09:09

AltaGas Announces US$515 Million US Power Acquisition and $352 Million Common Share Offering
AltaGas has entered into an agreement with a syndicate of underwriters, co-led by TD Securities Inc. and RBC Capital Markets as joint bookrunners, under which the underwriters have agreed to purchase from AltaGas and sell to the public 10,100,000 common shares at $34.90 per common share (the "Offering"). The sale of the common shares will result in gross proceeds of approximately $352 million, approximately $405 million if the Over-Allotment Option defined and described below is exercised in full.
Was at 36.04 on Friday.
The Acquisition is expected to be accretive to earnings and cash flow per share in 2014, the first full year of ownership, and is expected to add approximately $50 million in incremental contracted EBITDA per year.
Existing PPA concludes in 2020.
"A dividend is a dictate of management. A capital gain is a whim of the market."

User avatar
Mike Schimek
Gold Ring
Gold Ring
Posts: 2698
Joined: 04 Nov 2007 18:25
Location: Montreal, Quebec

Re: AltaGas Services Ltd. (ALA-T)

Post by Mike Schimek » 26 Mar 2013 00:41

This one's a bit of a ponzi scheme just like Crescent Point, though not quite as bad. I just wrote some stuff on CPG in the what did you buy thread. Look at Alta Gas's financials, they have an accumulated deficit of 69 million for all the years they have been in operation. Buffet calls these "owner earnings". Don't have time to type more on it, but it's not a good investment. Earnings yield of just 4-5% doesn't make sense, you can find tons of better stocks with better earnings yields. I know this is a popular stock with many FWFers owning it, sorry if you feel offended for the criticism.

Cheers all
Research until your head hurts then scream Banzai!!! and charge fearlessly to victory or death!

2 yen
Gold Ring
Gold Ring
Posts: 2616
Joined: 09 Apr 2005 09:15

Re: AltaGas Services Ltd. (ALA-T)

Post by 2 yen » 26 Mar 2013 22:44

http://www.fool.ca/2013/03/canadas-next ... ocs0040001

This positive assessment is from Motley Fool. The author very briefly touches on the debt issue mentioned above by Mike, but overall is quite optimistic - based on projects due to come on line over the next few years. It's a little bit like Northland Power in that respect.

I own Alta Gas, although only came to this company last year - mainly for the dividend. At the time I wasn't so focussed on the long term, but now I am interested in holding this company for a long time and need reasons to do so.

Thoughts?

Cheers.

pecmajor
Bronze Ring
Bronze Ring
Posts: 46
Joined: 31 Oct 2010 18:16
Location: Toronto

Re: AltaGas Services Ltd. (ALA-T)

Post by pecmajor » 27 Mar 2013 22:30

But is the dividend safe :?: According to TDW the current payout ratio is 137%. TDW also has it on their action buy list. I am confused. Can any one enlighten me.
I bought the stock 6 months before it converted from an income trust and it has been good to me. Looks more like a growth story now with all the recent asset buying and all the associated risks instead of a nice safe income producing utility. I will hold for now but not add to my position.

2 yen
Gold Ring
Gold Ring
Posts: 2616
Joined: 09 Apr 2005 09:15

Re: AltaGas Services Ltd. (ALA-T)

Post by 2 yen » 27 Apr 2013 07:36

Well, with the dividend increase and growth prospects, I'm quite chuffed about this company! :o

User avatar
Descartes
Gold Ring
Gold Ring
Posts: 1153
Joined: 03 Nov 2008 09:59

Re: AltaGas Services Ltd. (ALA-T)

Post by Descartes » 17 May 2013 13:42

Descartes wrote:AltaGas Announces US$515 Million US Power Acquisition and $352 Million Common Share Offering
AltaGas has entered into an agreement with a syndicate of underwriters, co-led by TD Securities Inc. and RBC Capital Markets as joint bookrunners, under which the underwriters have agreed to purchase from AltaGas and sell to the public 10,100,000 common shares at $34.90 per common share (the "Offering"). The sale of the common shares will result in gross proceeds of approximately $352 million, approximately $405 million if the Over-Allotment Option defined and described below is exercised in full.
This purchase closed today. In retrospect, it would have been a nice 15% gain + a monthly div payment to buy a month and a half ago when those common shares were offered.

I was at a full position already and so let it pass but I like the recent moves this company is doing and I like their dividend friendly attitude.
"A dividend is a dictate of management. A capital gain is a whim of the market."

JaydoubleU
Gold Ring
Gold Ring
Posts: 2096
Joined: 13 Sep 2007 22:52

Re: AltaGas Services Ltd. (ALA-T)

Post by JaydoubleU » 12 Nov 2015 00:41

I am having a look at this company and wondering if it's worth buying. I like that it's down 24% YTD, alongside a 1-year dividend growth rate of 12% and a 5-yr rate of 8.45%. It seems quite diversified between gas transmission, utilities, and power, including renewable power. The P/E of 59 is a bit frightening, mind you.

I am wondering if it can be compared to TRP at all, or are they completely different fish. (?)

Which of these appears the best buy right now, TRP or ALA? (thinking out loud)

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18245
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: AltaGas Services Ltd. (ALA-T)

Post by AltaRed » 12 Nov 2015 10:27

I bought a position in ALA a few months ago at circa $33 and change. I cannot tell you whether to buy TRP or ALA but both are reasonably valued at these levels. To some extent, you have to ignore the P/E of ALA due to its high growth past, i.e. DD&A is high at the moment and that skews earnings. Better to look at their cash flow, EBITDA and other metrics. Similar issues have plagued ENB and TRP in the past (ENB especially now that they have spun off legacy assets into ENF).

ALA's business is becoming more and more electrical generation in BC and California, along with a regulated (utility) gas distribution and retail business (AltaGas and PNG to the West Coast) and Cost of Service midstream gas processing. Their exposure to commodity prices (NGL spreads) is decling over time. My biggest concern (hope) is they give up soon on the Douglas Channel LNG project. They are in it mostly because of their gas processing and PNG gas transmission business that would feed that project but LNG by itself in North America has been a nemesis even for the biggest and best.

As an aside, ALA just came out with yet another $100M Pref share offering today @ 5.25% (Min Rate), i.e. reset is GoC5+419 bp with a 5.25% floor. ALA has been active in the Pref market and may be trying to emulate the TRP and ENB business model. That may be good or bad.

The question as to whether TRP or ALA depends on your view of the relative growth of each, or more importantly prudent growth. I own both.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

JaydoubleU
Gold Ring
Gold Ring
Posts: 2096
Joined: 13 Sep 2007 22:52

Re: AltaGas Services Ltd. (ALA-T)

Post by JaydoubleU » 12 Nov 2015 16:11

Thanks -

I am going to pick up a few ALA now, and keep watching TRP for another possible addition.

northbynorthwest
Bronze Ring
Bronze Ring
Posts: 86
Joined: 19 Jan 2007 01:07
Location: Vancouver

Re: AltaGas Services Ltd. (ALA-T)

Post by northbynorthwest » 13 Nov 2015 00:22

AltaRed wrote:I bought a position in ALA a few months ago at circa $33 and change.
When I last bought I had a $31 ish bid in late August. Which I thought was stinky. But it filled at $27.10 on Aug. 24. :shock:
I'd paid more than you earlier when I started ALA position, so my ACB is probably about the same as yours.

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18245
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: AltaGas Services Ltd. (ALA-T)

Post by AltaRed » 13 Nov 2015 00:35

Obviously a good buy at ~$27+. The value of stink bids. I wish I would have had more stink bids in on more stocks than I did on Aug 24th but I was a little lax over the summer holidays not having more in place.

I think ALA could see a bit more softness before it heads the other direction, simply until investors are confident there is a bottom to Alberta power prices, i.e. the same factor that also affects other power producers (Atco, TA, Fortis et al) in varying degrees. That said, I believe its financials will continue to show quarter over quarter growth mostly due to its ex-Alberta assets.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

JaydoubleU
Gold Ring
Gold Ring
Posts: 2096
Joined: 13 Sep 2007 22:52

Re: AltaGas Services Ltd. (ALA-T)

Post by JaydoubleU » 13 Nov 2015 05:15

"Should have, would have" is the name of the game. I can wait for that golden moment when ALA touches its 52-week low, or I can buy on weakness (now) and collect dividends while I wait. And while I'm waiting, I can watch for opportunities to add.

I too was caught a bit off guard in August. But I was looking elsewhere then.

I am hoping and planning that this will be a 5 to 10 year investment, perhaps longer, and so I expect higher everything over that time.

2 yen
Gold Ring
Gold Ring
Posts: 2616
Joined: 09 Apr 2005 09:15

Re: AltaGas Services Ltd. (ALA-T)

Post by 2 yen » 13 Nov 2015 10:28

AltaRed wrote:Obviously a good buy at ~$27+. The value of stink bids. I wish I would have had more stink bids in on more stocks than I did on Aug 24th but I was a little lax over the summer holidays not having more in place.

I think ALA could see a bit more softness before it heads the other direction, simply until investors are confident there is a bottom to Alberta power prices, i.e. the same factor that also affects other power producers (Atco, TA, Fortis et al) in varying degrees. That said, I believe its financials will continue to show quarter over quarter growth mostly due to its ex-Alberta assets.
And I get the vibe that the company is actually quite well run. Unlike TA.

2 yen

JaydoubleU
Gold Ring
Gold Ring
Posts: 2096
Joined: 13 Sep 2007 22:52

Re: AltaGas Services Ltd. (ALA-T)

Post by JaydoubleU » 13 Nov 2015 16:23

Reassuring to hear some voices of confidence in ALA. I looked at the company's latest presentation, and I liked its diversification, and also its commitment to increasing renewables and reducing direct exposure to commodity prices. I am hopeful they will benefit in a big transition from coal to natural gas. The dividend looks reasonably safe and has a good record of growth. Appears to be very well-managed, as 2 yen says.

I also noted that Sentry appears to have backed up the truck for ALA, adding it to its Canadian Income, Small/Mid-Cap Income, Diversified Income, and Growth and Income Funds; and it is already a top holding in all of them. I have followed these guys for years, along with Mawer (which also holds ALA), and they seem to know what they are doing.

And so I bought a little more today.

JaydoubleU
Gold Ring
Gold Ring
Posts: 2096
Joined: 13 Sep 2007 22:52

Re: AltaGas Services Ltd. (ALA-T)

Post by JaydoubleU » 14 Nov 2015 03:50

A bit of evidence here for my claim above that Sentry has "backed up the truck":

http://quote.morningstar.ca/Quicktakes/ ... ture=en-CA

northbynorthwest
Bronze Ring
Bronze Ring
Posts: 86
Joined: 19 Jan 2007 01:07
Location: Vancouver

Re: AltaGas Services Ltd. (ALA-T)

Post by northbynorthwest » 14 Nov 2015 15:38

JaydoubleU wrote:A bit of evidence here for my claim above that Sentry has "backed up the truck":

http://quote.morningstar.ca/Quicktakes/ ... ture=en-CA
I've never thought to look for that! Yet another FWF learn. :thumbsup:

I do often check insider trades via INK on TDDI.
It seems to show ALA's CEO did significant selling Nov. 3-4.
But there's also a bunch of new activity with options and rights restricted units – someone smarter than me will have to decipher whether it's a wash or really noteworthy.

JaydoubleU
Gold Ring
Gold Ring
Posts: 2096
Joined: 13 Sep 2007 22:52

Re: AltaGas Services Ltd. (ALA-T)

Post by JaydoubleU » 14 Nov 2015 17:27

The morningstar site doesn't show insider trading; it shows major share ownership,such as funds, institution and banks, including buying and selling. I find it interesting, although the info is a little old, and it isn't easy to decipher what anything means. With big stocks like the banks, there is always buying and selling going on--probably just portfolio management. It works better with smaller stocks because there are fewer owners, and they tend to be more concentrated. The info there on ALA tells me that Sentry HAD an existing position in ALA but added to it considerably in the 3rd quarter. Mawer New Canada was also a buyer.

As for insider trading, I once read that not too much can be concluded from insider selling, since there can be all sorts of reasons. The CEO of ALA could be retiring; perhaps there is estate reorganization; maybe he wants to to cash in his options and buy a new house. However, insider buying (so I've read) is for one reason only: the insiders think the stock is undervalued and is going to improve, or they know something that others don't. Of course massive insider selling by multiple insiders might be interpreted differently and less benignly.

Post Reply