In case you missed it, Kinder Morgan (KMI) is back in our crosshairs after posting underwhelming 3Q15 results, reflecting just how overvalued this name is. For the record, KMI remains a capital intensive, cyclical conglomerate with low-to-no growth and an over-levered balance sheet.
In Kaiser’s opinion, the MLP “go-go” days of valuing this company based upon its dividend/distribution are behind us. He sees no reason why fair value for this company shouldn’t be in the range of 9x-10x current EV/EBITDA, or $10-$13 per share suggesting over 55% downside.
In its conference call last week, Kinder Morgan reduced its 2016 dividend growth guidance to +6%-10% from 10%+ through 2020 and offered new commentary that management has found a new “alternative source” of equity capital.
Bottom line: Whether it’s Rich Kinder himself, or other avenues, investors should be very wary of any new financing vehicle options that may be introduced as the ultimate “Hail Mary” to salvage this broken model.
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