Pembina Pipeline: We Transfer Coverage With No Moat Rating; Shares Fairly Valued

After taking a fresh look, we lower no-moat-rated Pembina's fair value estimate to CAD 53 from CAD 55 and to USD 38 from USD 39, respectively. Management indicated that toll negotiations for the Canadian section of the Alliance pipeline are likely to result in a negative outcome, with rates expected to decline. The exact timing is unknown, as discussions are ongoing. Further uncertainty around US tolls is now likely weighing on shares, which are up for review at the end of the year.