Post by
Obscure1 on Dec 05, 2023 5:32pm
Price target for amusement purposes only
Ganyman:
In order for the NAV to increase, the ENB shares have to go back. An increase in the Premium to the NAV from its current 10% premium would also increase the ENS share price but I'm not smart enough to figure how that one will go.
The ENB shares need to go up by about $1.70 next year in order for the NAV to remain where it is.
How do I get that number?
One ENS Unit holds about 0.44 shares of ENB. In order for the ENS Unit NAV to make up the cash flow shortfall of $0.75 in 2024, ach year, you have to divide $0.75 / 0.44 = $1.70
If ENB goes up by $1.70 in the next year, the ENS NAV will be flat.
My expectation is that we will see ENB trading back in the $55 range at some point next year which is $7.32 higher than today's closing price.
Who knows what ENB will be trading at by the end of 2024. The biggest factor in determining the ENB share price going forward will likely be interest rates as the company is extremely forthcoming and transparent with its shareholders. I'm a big fan of ENB's open door transparency.
I expect interest rates to drop by the end of 2024. When interest rates go down, stock prices go up, especially stocks like ENB tht are interest rate sensitive
IF ENB ends up 2024 at my mythical $55 price, and the ENS Premium to the NAV stays at the current 10% level, I would expect the share price of ENS to be $2.47 higher than it is today.
How did I get that number?
ENB at $55 would be $7.32 higher than it is today. ENS needs ENB to go up by $1.70 per year to offset the expected 2024 cash flow shortfall of $0.75. Therefore, $7.32 - $1.70 = $5.62
IF ENB increases by a net $5.62 (after accounting for the $1.70 required to compensate for the deterioration of the NAV due to dividend overpayments beyond what ENS takes in) then I would expect ENS to increase by 0.44 * $5.62 = $2.47. Adding $2.47 on to the current ENS share price of $12.23 produces $14.69 per share.
WAYYY too many "if ands or butts" assumptions to make my target price realistic in the real world. However, you have to start somewhere. When I was an analyst, my job was to produce price targets and the thinking above is how I would go about it. It is too much work and explanation for this thread why I have a one year price target of $55 for ENB. I just checked the median twelve month concensus analyst price target for ENB which turns out to be Cdn$53.77 based upon an exchange rate of 1.35 which is a relief :)
In order for my target to be realistic, the following need to happen:
1) interest rates will start heading down beginning in Q2 in 2024 or certainly in the 2nd half
2) the world economy doesn't crash in 2024
3) the market is UP overall next year (I wouldn't be surprised by a short and shallow recession in the first half of 2022)
4) ENB needs to perform like it has always performed
5) the ENB acquistion of the 3 Dominion assets are not built into the equation as they may or may not happen and if it does happen, the net effect on 2024 financials will be minimal
Price targets are a mugs game at best because anlysts can only go on the information they have at any given time and the world has a way of pooping all over expectations. I don't begin to know what is going toi happen. I do think that ENS's divi will be safe, even in the case of a pretty awful scenario.
The above is for amusement purposes only.