,,,,,,,,,,,,,,,,,,,National Bank.........UPGRADE............ TransAlta Upgraded to Outperform, Price Target Raised to $15 at National Bank
08:37 AM EST, 01/27/2023 (MT Newswires) -- National Bank has raised its rating on TransAlta to Outperform, from Sector Perform, and upped its one year price target on the stock by $1, to $15.
Analyst Patrick Kenny writes, "Based on our EBITDA forecast for the AB Hydro Assets through 2024e, we calculate Brookfield's $750 million Strategic Investment would convert into an equity stake in the Alberta Hydro Assets of <15% if exercised in 2025 (well below the initial 30-35% expectation), and compounding the positive impact on our DCF valuation from the outsized near-term cash flow performance from the assets."
With rising corporate PPA demand for new renewables, combined with Canada's recent 30% renewable ITC announcement, Kenny anticipates the company successfully sanctioning 500 MW of contracted growth through 2023, while also completing rehabilitation of the entire fleet of turbines at Kent Hills. Meanwhile, with forward AB power prices sitting at ~$160/MWh through
2023e, TransAlta is expected to increase its initial 2023 financial guidance from $1.20-$1.32 billion towards NBF's $1.5 billion forecast throughout the year, supporting another dividend increase of ~10%, which the analyst expects to be announced towards year-end.
Bottomline, "we recommend accumulating the stock at the current valuation of ~4.5x 2024e P/AFFO (peers: ~5.5x)."