AltaGas Inc. Equity Research Pitch

CFA Research Challenge

Team Members: Joshua Hickling, Ali Radwan, Soumik Sarkar, Kyle Hoover Reoyo

Dec 2024

This report was produced in late 2024 as part of the CFA Research Challenge, where our team conducted full fundamental equity research on AltaGas (TSX: ALA). The objective was to develop an institutional-quality investment recommendation supported by detailed financial modeling, peer valuation, and strategic analysis.

The analysis highlighted de-risked cash flows supported by long-term take-or-pay contracts, a strong West Coast LPG export advantage with faster access to Asian markets, and valuation support relative to both midstream and regulated utility peers.

Aerial view of an industrial site next to a large body of water with islands and mountains in the background, featuring storage tanks, pipelines, and construction structures.
A financial analysis slide from AltaGas recommending a buy for a stock with a one-year target price of $40 and an implied return of 22.1% by January 13, 2025, including three key points on cash flows, LPG export advantage, and geographic diversificat
Business slide displaying a pie chart of normalized EBITDA split between Midstream (45%) and Utilities (55%) for 2024, with the total normalized EBITDA of $1.75 billion CAD, and maps showing the Midstream segment in Western Canada and Utilities sprea
Graph showing AltaGas' midstream export volumes, including extracted NGL, fractionation, and LPG export volumes, with a line representing midstream EBITDA from Q3 2023 to Q3 2024, and a note about record export volumes in Q3 2024.
Financial presentation slide showing AltGas's utility operations with a bar and line chart of EBITDA and ROE projections from 2019 to 2024, a donut chart displaying customer distributions between Washington Gas and SEMCO, and a note about over 1.5 mi
Industry analysis chart showing Montney production and Canada LPG export capacity from 2020 to 2030, with projections to 2050, indicating growth in LNG production and Asian demand.
Slide titled 'LPG export facilities on the west coast will drive growth' with two charts and bullet points. The first chart shows LPG export capacity growth from 2022 to 2026, indicating increases in KPI and REEF. The second chart displays EBITDA gro
Title slide of a presentation about utility growth and geographic positioning with a chart showing top US data center locations, a graph projecting demand growth until 2030, and a USD exchange rate chart.
A presentation slide titled 'Strong west coast competitive edge' discussing AltGas's market advantages like faster shipping and stable cash flows, with maps showing shipping routes and timelines from the U.S. to Asia and the Middle East, and a table
Comparison of midstream and utilities peers in the Altagas valuation, including market cap, revenue, 5-year EBITDA CAGR, LTM EV/EBITDA, net debt/EBITDA, and dividend yield.
Bar chart comparing various valuation metrics to a target price of $40. The chart shows 52-week high/low, street targets, blended valuation, 5-year discounted cash flow, and 2025 enterprise value/EBITDA.
Financial analysis of AltaGas showing a map of pipelines, graphs of net debt to EBITDA ratios, and current ratio trends from FY2018 to FY2021, with text about maintaining a strong balance sheet and reaching leverage targets
Slide showing AltaGas's sustainability initiatives, ESG scores, GHG emissions, and recordable injury frequency compared to industry metrics.
A slide titled 'Potential Downsides and Challenges' showing a graph with four risks categorized by impact and probability. The risks are labeled A: Commodity Price Risk, B: Regulatory Risk, C: Project Execution Risk, D: ESG Risk, with corresponding d
Slide from a presentation with the title 'We issue a BUY recommendation with a 1-year target price of $40 and a 22.1% implied return on the Jan 13, 2025, close price.' Contains three sections discussing reliable cash flows, high growth potential, and
An aerial view of a gas processing plant near a body of water, surrounded by forested landscape and mountains in the distance.
Bar charts depicting the growth of data centers in the US from 2014 to 2030, including power consumption by providers, and projected construction spending until 2030, with source attribution to McKinsey & Company.
Financial analysis charts including valuation sensitivities, case analysis, and revenue forecasts for AltaGas, with bar graphs showing revenue trends from 2021 to 2028.
A financial chart titled 'Relative valuation against peers' showing different graphs and bar charts comparing EV/EBITDA ratios among various companies and sectors over time, with data sourced from S&P Capital IQ.
A set of four bubble charts comparing 5-year EBITDA CAGR and ROIC versus market cap for peer groups in the energy sector. The charts are titled 'Peer benchmarking' and are labeled as 'Midstream Peers' and 'Utilities Peers'. The charts display various
A table comparing standards, ratings, and regulation policies within ESG reporting by AltaGas. It includes descriptions and example organizations for each category, featuring logos of various organizations and regulatory bodies.
A table comparing company and industry performance across different ratings in North America, Asia & Middle East, and Europe, with various ESG metrics and insights.
CFA Institute Research Challenge document with CFA Institute logo, titled 'CFA Institute Research Challenge', hosted by CFA Society Calgary, Team C, describing competition rules and disclosures.
Financial report for AltaGas, an energy and utilities company, including executive summary, market profile, key metrics, and 5-year historical performance chart.
A financial report page with text, a line graph, and a pie chart. The graph shows stock performance from January 2020 to January 2025 for two companies, ALA and TSX 60. The pie chart depicts EBITDA segments with percentages labeled for Midstream, Uti
Graph showing EBITDA and EPS growth projections from 2021 to 2025, a map of Canadian utility regions, and a chart of NGL volume extraction and export volumes over recent quarters.
Graphs depicting utilities EBITDA from 2018 to 2023, LNG mix pricing from 2020 to 2026, and Asian LPG demand from 2015 to 2050. A bar chart showing LNG project-related data with countries' contributions, and a paragraph discussing investments, infras
Line chart titled 'Interest Rates vs. ALA Stock' showing AltaGas Ltd, US Treasury, and Canada Government Debt from 2020 to 2025. The chart has a y-axis from -200 to 400 and a timeline from Jan-20 to Jan-25.
Line graph showing the company's export figures from 2014 to 2024, with five lines representing different export facilities or regions. The graph has a vertical axis from $0 to $700 and a horizontal axis from 2014 to 2024.
Bar chart showing EBITDA by contract type from 2020 to 2024, with segments labeled Cost-of-Service, Take-or-Pay, and Fee-for-Service
A page from a financial report featuring line graphs and text discussing company's performance, valuation, and energy transition strategies.
Multiple business and financial charts, including bar graphs and line charts, depicting utility EV/EBITDA, valuation data, and valuation football field in a financial report.
A financial report page with text, two bar charts, and two line graphs related to corporate financial analysis and performance metrics.
Page from a report discussing environmental, social, and governance topics, including graphs on GHG emissions, ESG scores, and CEO salary breakdown.
Two pie charts displaying executive compensation and salary breakdowns for CEO and NEO, highlighting pay components and risk levels.
A page of a report discussing energy companies, pipeline projects, and investment performance, with a section titled 'Appendix A - 3-Year Historical Performance'.
Line graph showing stock price trends of various companies from January 2022 to January 2025, with different colored lines representing each company.
Page titled 'Appendix B – Operating Model' with no additional visible content.
A financial projection chart showing various metrics from 2018 to 2029, including revenue, EBIT, tax rate, D&A, CapEx, and net working capital, segmented into midstream, utilities, and total figures.
A detailed financial table titled 'Appendix C - Consolidated Discounted Cash Flow Model (Bull)' showing assumptions around WACC and TGR, with projected revenue, EBIT, taxes, and other financial metrics from 2021 to 2029, concluding with enterprise va
A financial spreadsheet titled 'Appendix D - Consolidated Discounted Cash Flow Model (Base)' with columns for years 2021 to 2029E and rows for revenue, EBIT, taxes, D&A, CapEx, change in NWC, unlevered FCF, PV of UFCF, enterprise value, net debt, pre
A financial spreadsheet titled 'Appendix E - Consolidated Discounted Cash Flow Model (Bear)' showing assumptions, revenue, EBIT, taxes, EBITDA, D&A, CapEx, change in NWC, unlevered FCF, PV of UCFF, stub, discount period, terminal value, enterprise va
A financial cash flow model table titled 'Appendix F - Midstream Discounted Cash Flow Model (Bull)'. It contains assumptions, revenue, EBIT, taxes, EBITDA, D&A, CapEx, change in NWC, unlevered FCF, PV of UCFC, terminal value, and enterprise value dat
Financial spreadsheet titled 'Appendix G - Midstream Discounted Cash Flow Model (Base)', showing assumptions like WACC and TGR, and calculating revenues, EBIT, taxes, EBITA, D&A, CapEx, change in NWC, unlevered free cash flow, present value of UFCF,
Title page of a document titled 'Appendix H - Midstream Discounted Cash Flow Model (Bear)'
Financial spreadsheet showing assumptions, midstream discounted cash flow, revenue, EBIT, taxes, EBITDA, D&A, CapEx, change in NWC, unlevered free cash flow, PV of UCFF, terminal value, enterprise value for years from 2021 to 2029.
Financial table titled 'Appendix I – Utilities Discounted Cash Flow Model (Bull)', showing projected revenue, EBIT, taxes, EBITDA, D&A, CapEx, change in net working capital, unlevered FCF, PV of UCFC, terminal value, enterprise value, and assumptions
Financial spreadsheet titled 'Appendix J – Utilities Discounted Cash Flow Model (Base)' with data, assumptions, and projections related to utility revenues, EBIT, taxes, D&A, CapEx, change in NWC, unlevered FCF, PV of UCFE, terminal value, enterprise
Financial spreadsheet for utility companies showing projected revenue, EBIT, taxes, D&A, CapEx, change in NWC, unlevered FCF, PV of UCFE, terminal value, and enterprise value from 2021 to 2029.
Table titled 'Appendix L - Comparable Company Analysis (Bull)' displaying financial data for various companies, including stock ticker, company name, stock price, shares outstanding, net debt, market cap, enterprise value, EBITDA, and multiple ratios
A detailed financial chart titled "Appendix M - Comparable Company Analysis (Base)" showing company data, market data, financial metrics, and valuation details for several energy companies, including Enbridge Inc., Gibson Energy Inc., Keyera Corp., P
A detailed financial analysis table titled 'Appendix N - Comparable Company Analysis (Bear)', showing data for various companies, including market data and financial metrics, with sections for midstream and utilities companies, and summary metrics at
A financial table titled 'Appendix P – Weighted Average Cost of Capital' showing data such as Market Cap, % of Equity, Cost of Equity, Risk Free Rate, Beta, Market Risk Premium, Debt, % of Debt, Cost of Debt, Tax Rate, Total, and WACC with various nu
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