CIBC World Markets Inc. reinstated its "Sector Outperformer" rating on NAL Energy Corp. (TSX:NAE.TO) with an unchanged price target of $10.50 after coming off restriction following the close of the company's issuance of $150 million of convertible debentures.
Jeremy Kaliel, an analyst at CIBC, noted that the notes have a coupon of 6.25%, a maturity date of March 31, 2017, and will not be redeemable prior to March 31, 2015. Following the issuance, NAL will have about $400 million of undrawn capacity on credit lines of $550 million.
"With its reduced dividend, NAL screens as one of our most sustainable names with a 2012E total payout ratio of 96% (including the DRIP) vs. the group at 110%. With a sustainable current yield of 8.2%, NAL is our top pick for yield-focused investors," Kaliel wrote in a note.
Kaliel moved down its 2012 EPS estimate for the company to $1.87 from $1.88 and 2013 EPS estimate to $2.06 from $2.07.
NAL Energy, formerly known as NAL Oil & Gas Trust, focuses on acquiring, developing, producing and selling crude oil, natural gas and natural gas liquids from pools in southeastern Saskatchewan, central Alberta, northeastern British Columbia and Lake Erie, Ontario.
The stock, which has been trading between $6.38 and $14.58 in the past year, is currently up 4.35% to $7.68.