Capstone Infrastructure Corp T.CSE.PR.A

RBC Summary of 7 Oct

[anon314]

Capstone Infrastructure Corp. (CSE) - $3.12
Veritas: Buy (PT $5)
With a final regulatory decision in hand, CSE updated its cash flow outlook, suggesting its U.K. water utility, Bristol Water, will be capable of paying substantial dividends over the next five years. Specifically, based on its preliminary review of the final regulatory decision for Bristol, CSE anticipates average annual distributions of approximately $8 million per year, or $0.08 per share. This $0.08 per share represents 27% of the current $0.30 annual dividend, firming up dividend sustainability as CSE continues to develop a portfolio of wind farms. Veritas continues to believe investors will be handsomely rewarded by investing in CSE at the current share price, and with improved dividend sustainability, reiterates Buy and PT of $5.
RBC CM: Outperform (PT $4)
The UK Competition and Markets Authority (CMA) released its final determination on Bristol Water, which was largely consistent with the provisional findings. While the market did not expect a materially different economic decision, RBC CM believes this should clear any regulatory overhang and allow investors to focus on the value of the existing assets. In light of the CMA’s final determination, RBC CM has assumed a more conservative distribution profile from Bristol Water to its stakeholders. As a result, ACCFO estimates have been tweaked slightly lower. All in, visibility on Capstone Infrastructure’s cash flow profile has improved with the 2014 recontracting of the Cardinal facility for 20 years and the recent finalization of the Bristol Water business plan. RBC CM believes investors may start to focus on the underlying value of Capstone Infrastructure’s highly contracted/regulated asset portfolio; reiterate Outperform and PT of $4.