Post by
CanSiamCyp on Dec 02, 2021 11:15am
BMO comment on 2021 Investor Day
2021 Investor Day Supports Our Outperform Rating and Top 5 Best Idea Designation
Bottom Line:
Emera delivered a series of detailed presentations at its virtual 2021 Investor Day. While the rate base CAGR expectation was lowered with the 1-year roll-forward to 2024, the new ~6.8% growth guidance is still attractive and above the 2-6% range of its Canadian utility peers. Combined with the low-risk business profile (95%-plus regulated) and crown jewel Florida utility assets (~54% of 2020 adjusted earnings), we believe a premium valuation to the group is still warranted. Accordingly, we are maintaining our $65 target, Outperform rating, and Top 5 Best Idea designation.
Key Points
Rate base growth lowered, but still at industry leading levels. The lower rate base growth CAGR of 6.8% (2020-2024E) from the previous 7.5% (2019-2023E) caught attention, especially given the boost to capital spending levels (3-year capex of $8.4B vs. $7.4B previously). However, the new lower anticipated growth is not as bad as it seems at first glance given that most of the decrease was due to USD F/X translation, there is potential upside to the base growth targets, and it is still at the upper end of the Canadian utility peer range (2-6%).
Still no need for "external equity". Despite the higher capital expenditure guidance through 2024, management noted that it still does not require “external equity”. More specifically, management highlighted that sources of funding for the 2022-2024 capex plan will come from reinvested cash flow (50-55%), new debt issuances (25-35%), and DRIP/ATM/hybrids (15-25%). Further to this, management reiterated its confidence in delivering ~$2B of operating cash flow in 2022 (vs. $1.35B Q3/21 LTM), 4-5% dividend growth through 2024, and sustaining a low-risk business profile (95%-plus regulated).
Revised estimates. We have updated our financial model to reflect the new 2022-2024E capex, rate base, and funding plan guidance. Net, our 2021E EPS (f.d.) is $2.83 (vs. $2.85), 2022E is $3.05 (vs. $3.06) and 2023E is $3.16 (vs. $3.17).