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 ."
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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.
