Morgan Stanley Maintains Under-Weight, $20 PT on Questar

Morgan Stanley reiterates its Under-weight rating and $20 price target on Questar STR relative stock value offsets the steady growth the company sees in the next five years. Morgan Stanley had the following takeaways from a meeting with company management: "1) Questar seeks to acquire new E&P assets into Wexpro, but first it must seek approval for an addendum to the existing Wexpro agreement. We expect Wexpro could get approval in 1Q12. 2) Cost trackers enable Questar Gas to grow its rate base 7 - 9% annually. 3) Wexpro's share of Questar Gas's supply is set to increase to 60% (from 50%). 4) Dividend growth should outpace EPS growth as STR moves to a 60% payout ratio. 5) Pipeline acquisition opportunities may surface, resulting from the KMI/EP acquisition."