Nesbitt UpdateEMERA INC. (EMA-TSX) KAREN TAYLOR, CFA
Rating: Market Perform
Price: $20.15
Target: $20.00
2005A EPS: $1.04
2006E EPS: $1.18 á
2007E EPS: $1.20 á
Title: Fiscal 2005 Slightly Higher than Expected; Market Perform Rating Maintained
Event: Emera reported Q4/05 and fiscal 2005 EPS of $0.34 and $1.11 versus our expectation of $0.31 and $1.03, respectively. After adjusting for the Q4/04 portion of the positive adjustment (i.e., lower costs) reported in Q4/05 of approximately $2 million after tax and a $5 million after-tax one-time payment from Nova Scotia Power’s (100% - Emera Inc.) natural gas supplier, results were approximately $0.28 and $1.04 per share, respectively, slightly higher than expected. There are two key one-time benefits reported in the “Other” segment that increase fiscal 2005 results and that have not been “adjusted away” in our normalized quarterly and annual earnings presentation.
Impact: Mixed.
Forecasts: We have updated our financial model to reflect fiscal 2005 performance. As a result, our diluted 2006 and 2007 EPS estimates increase to $1.18 and $1.20, from $1.15 and $1.18 per share, respectively.
Valuation: Our target price of $20.00 is unchanged and reflects a weighted average valuation approach: 15x 2007 diluted EPS of $1.20 (12.5%), 1.6x 2007E book value per share of $13.07 (12.5%) and a target yield of $4.5% (75%), assuming 2007 dividends per share of $0.91.
Recommendation: We believe that the shares are reasonably valued. Our rating is Market Perform.