Quarterly earnings preview: "Most of the sector is experiencing
very robust and, at times, peak valuations, therefore, we believe
greater stock selectivity should exist at this time. In general, we
continue to prefer companies generating relatively strong cash
flows in most economic scenarios, long-term underlying asset value,
reasonable relative and absolute valuations and manageable external
capital market needs (for both equity and fixed income). Aside from
a chase for dividends and income oriented product, we do not
believe the sector will face a significant multiple expansion or
notable near-term upward momentum. Over the next few years, we
believe many companies within the sector are very well positioned
for meaningful asset, cash flow, dividend and earnings growth."
Selected specifics: "We continue to believe quarterly results
are not a major driving force for a considerable portion of our
infrastructure universe. Yet, in our view, this earnings season may
provide more insight on a selection of issues for several companies
within our coverage universe, including: (a) an interesting Alberta
power market given the Sundance 1 and 2 outage [Capital Power Corp
(CPX.TO), TransAlta Corp (TA.TO) and TransCanada Corp (TRP.TO)];
(b) restructuring and M&A opportunities [Enbridge (ENB.TO) and
Fortis (FTS.TO)); (c) the ongoing development of North America's
crude oil pipeline system (ENB and TRP); (d) new infrastructure
build supporting some large commodity projects; (e) dividend appeal
with potential for an adoption of cash flow payout targets (
); (f) direct pension fund investment longer-dated assets; and, (g)
positive credit market conditions for long-dated assets.
Corporate strategy and development a focus: For most of our
universe, we continue to place little emphasis on the quarterly
results and focus our efforts on incremental information that
either supports or detracts from each investment thesis in this
long cycle infrastructure focused sector."
Potential results release dates include:
Tuesday, October 25th CPX.
Friday, October 28th TA.
Tuesday, November 1st TRP.
Thursday, November 3rd FTS.
Friday, November 4th BIP, Emera (EMA.TO) and Pacific Northern
Wednesday, November 9th BRC and ENB.
Friday, November 11th BAM.
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