Contents
Summary
- This company has tested long-term investor patience over the past 3 years.
- Management has 5 strategic priorities, one of which is a simplified corporate structure. These initiatives are in various stages of progress and once completed should result in improved shareholder returns.
- Shareholders are rewarded with an attractive dividend that is well covered by Distributions from Cash Flow while waiting for the share price to appreciate.
- I view the shares as undervalued even though the share price has ticked up ~23% since late April.
- I will be acquiring another 400 – 500 shares within the next 72 hours for the FFJ Portfolio’s ‘side account’.
Introduction
All dollar values expressed in this article are in CDN dollars unless otherwise noted.
My rationale for adding shares in this company to the FFJ Portfolio several months ago was that it I saw huge future potential. This company operates in a highly regulated industry which results in significant barriers to entry. In addition, this is an extremely capital intensive business but once the infrastructure is in place the business is tantamount to a toll road…revenue literally flows in.
The subject company has certainly been extremely busy in recent months. It has:
- announced a simplification of its corporate structure;
- generated strong operational performance across all business segments;
- has ~$7B of new projects on track to come into service in 2018 of which $1.6B have been brought into service YTD;
- received additional regulatory approval for the issuance of the Certificate of Need and Route Permit for one of its major projects;
- has agreements to sell $7.5B of non-core assets which is well above the $3B original target for 2018. The sale of non-core assets will enable this company to accelerate de-leveraging thus providing it with increased financial flexibility so as to further focus on lower risk businesses.
Given all the activity that has transpired in recent months and the fact it has recently released its Q2 2018 results, I thought this would be an opportune time to once again review this company to ensure there is nothing that would cause me to change my initial thesis for investing in this company.
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