TC Energy: May Be A Value Trap (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• TC Energy looks enticing with a high 7.00% dividend yield and 10-yr low valuations. But I believe it is a value trap.
• The company is an FCF bleeder, and this is expected to continue. Its dividends are funded by net debt issuances and its ROIC is below its cost of capital.
• TC Energy's debt portfolio is locked in at near all-time high interest rates heading into 2024 when rate cuts are expected. High debt servicing costs may be forcing asset sales.
• The company is pursuing asset sales as part of an aggressive deleveraging goal, but there may be some desperation in the selling, elevating value destruction risks.
• The value creation rationale for the spinoff of their Liquids business is unclear.

Read the full article here.