CIBC Capital Markets maintained it outperformer rating on the shares of Keyera (KEY.TO) while raising its price target to C$65.00 from $63.00 after the company closed its $5.15-billion acquisition of Plains All-American Pipeline's (PAA) Canadian natural-gas liquids business.
Keyera provided a business update that reinforces CIBC's constructive view on the Plains acquisition. The update reduces near-term earnings volatility through a more robust hedging profile as the company achieves meaningful synergy capture.
CIBC found that the pro forma outlook provided improved visibility into peer-leading fee-based growth and a runway of capital-efficient investment opportunities across the combined platform.
"One of the key takeaways from the updated framework is management's confidence that KEY can sustain its historical fee-based growth profile despite operating from a materially larger earnings base," CIBC said.
Keyera is targeting 35% fee-based EBITDA/share growth from 2025 to 2027 (16% CAGR), driven by acquisition synergies, utilization gains and expansion projects currently underway, followed by a 7%-8% CAGR through 2029.
CIBC views the outlook as achievable. Management has only incorporated projects sanctioned to date and no-capital synergies, suggesting that while larger-scale projects may fall beyond the outlook timeframe, incremental debottlenecking and optimization opportunities can act as a source of upside.
Price: $55.83, Change: $-1.37, Percent Change: -2.40%