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Emera up more than 3% as Credit Suisse maintains Neutral rating, raises target price by $4

Credit Suisse maintained a Neutral rating Emera Inc. (EMA.TO) but raised its Estimates and Target Price to $34 from $30.

Earnings: "Emera reported Q4 2010 headline diluted EPS of C$0.34, which was identical to our estimate, above the Street's C$0.31 view and within the C$0.26-C$0.42 range. Excluding Bear Swamp's mark-to-market adjustment resulted in C$0.38 of EPS for the quarter. Rather impressively, the company continues to demonstrate progress with asset growth from multiple business opportunities. This progress should gradually aid in reducing EMA's cost-of-capital which would boost valuation. Given the long-cycle nature of most of our coverage universe, we do not place undue emphasis on quarterly results."

Selected notable items: "In our view, the following items were notable in the quarter: (a) NSPI's electric margin was constant at C$59/MWh in Q4 2010 and Q4 2009; (b) NSPI's average unit fuel costs increased to C$46/MWh in Q4 2010 versus C$43/MWh in the previous year, but declining from Q3 2010 at C$48/MWh; (c) Q4 2010's power volumes were 3,158 GWh versus 3,235 GWh in the same period last year; and, (d) Emera closed several deals prior to the year end and will look to finance with permanent capital likely in 2011."

A transition year: "In our view, 2010 was clearly a notable year of transition for Emera with the successful completion of several acquisitions, clear rate base growth, expansion into a large scale regional transmission project and, in general, an improved growth profile. Emera's ongoing execution of growth plan is likely to bode well for future valuation."

Valuation: "Given the passage of time and revisiting our financial model, our target price increases to C$34.00 from the previous C$30.00. We have slightly revised our EPS estimates for 2011 and 2012 from C$1.70 and C$1.67 to C$1.77 and C$1.82, respectively. Our C$34.00 target price is obtained by utilizing multiple valuation methodologies, including: an 18.5x P/E multiple of 2012 earnings; a target 3.8% dividend yield, and a DCF based valuation. We reiterate our Neutral rating ."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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