TD starts coverage on Canadian Midstream stocks, Pembina, TC Energy top picks

Investing.com -- Companies with significant natural gas exposure and scale advantages are best positioned to outperform in the Canadian midstream sector, TD Cowen said on improved valuations and strong growth visibility.

The brokerage highlighted TC Energy (NYSE: TRP) Corp and Enbridge Inc as top picks for their robust growth platforms, with Pembina Pipeline Corp (NYSE: PBA) emerging as its favourite due to what it called a "mispriced" valuation.

Pembina Pipeline Corp (TSX: PPL) “ranked second overall in our scorecard, and we believe that Pembina features the best capital structure in Canadian Midstream,” for its strong capital structure, historical track record, and a competitively advantaged asset portfolio. Its stock, however, trades below its 10-year EV/EBITDA multiple.

As TD assigned Pembina a target price of C$66, it added “we believe that Pembina is fundamentally mispriced.”

“Buy” rated TC Energy Corp (TSX: TRP), with a C$77 target, was ranked first overall. The company benefitted from its high exposure to natural gas and a strong growth outlook. While Enbridge Inc (NYSE: ENB), ranked third, was noted for its yield and ability to capitalize on its growing natural gas platform.

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