Q: Hi.
Do you agree with TD's move on TOU from Buy to Hold? They also downgraded IMO to a sell. With the anticipated increase in demand for Nat Gas, in spite of TOUs low FCF yield, I would think there is runway for them. Any comments on both IMO and TOU?
Carl
Do you agree with TD's move on TOU from Buy to Hold? They also downgraded IMO to a sell. With the anticipated increase in demand for Nat Gas, in spite of TOUs low FCF yield, I would think there is runway for them. Any comments on both IMO and TOU?
Carl
5i Research Answer:
The downgrade stems from 'higher valuation' and 'significant capital expenditures'. But it is very cheap already and we think management deserves a premium. Capex historically has translated into very good growth and higher dividends. We would not read too much into the downgrade. IMO is up 41% this year and might consolidate. We would not view it negatively, however. TOU remains our favourite gas stock in Canada by far.