Kinder Morgan Detractor Says Pipeline Owner Is `Falling Knife'

  • Hedgeye says Kinder Morgan's value is less than $10 a share
  • Analyst Kevin Kaiser has urged investors to sell for 2 years

The Hedgeye Risk Management stock analyst whose criticism wiped $2 billion off Kinder Morgan Inc.’s value two years ago said shares in the largest North American pipeline operator are still more than 40 percent overvalued.

Kevin Kaiser, an analyst at Stamford, Connecticut-based Hedgeye, said Kinder Morgan’s 29 percent plunge so far this month may not have run its course. The company slashed its dividend by 74 percent this week amid concern that future cash flows may not be sufficient to finance growth and service a $41 billion debt load that exceeds the entire economic output of nations such as Bolivia or Bahrain.

Kaiser triggered a four-day sell-off in Kinder Morgan shares in September 2013 when he claimed the Houston-based company wasn’t spending enough to maintain thousands of miles of pipelines. The rout wasn’t halted until then-Chief Operating Officer Steve Kean hosted an early-morning conference call to assuage investors’ concerns. Kean is now CEO.

Richard Wheatley, a spokesman for Kinder Morgan, declined to comment. The stock fell 2.1 percent to $16.66 in New York Friday, and is down 61 percent this year.

“While some investors will be tempted to catch the KMI falling knife, we continue to strongly advise against it,” Kaiser said in a note to clients. “In our view, there is still substantial downside to fair value, which we believe is less than $10/share.”

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