Market Perform Rating Unchanged EMERA INC. (EMA-TSX) KAREN TAYLOR, CFA
Rating: Market Perform
Price: $18.51
Target: $19.25
2005A EPS: $1.04
2006E EPS: $1.12
2007E EPS: $1.17
Title: Proposed Brunswick Pipeline; Market Perform Rating Unchanged
Event: On May 16, Emera announced that it plans to invest approximately $350 million in the Brunswick Pipeline (100% - Emera), a proposed pipeline that would deliver natural gas from the planned Canaport Liquefied Natural Gas import terminal near Saint John, New Brunswick, to an interconnection with the existing U.S. portion of the Maritimes & Northeast Pipeline (12.92% - Emera) at the international border near Baileyville, Maine. The 30”, 850 mmcf/d pipeline is supported by a 25-year send-or-pay agreement with Repsol YPF, S.A. (BBB+ - S&P) for approximately 750 mmcf/d of capacity.
Impact: Potentially positive.
Forecasts: Our 2006 and 2007 diluted EPS estimates are unchanged. We have updated our financial model to reflect the assumptions set out herein. The potential contribution is approximately $0.08 per share (basic) on a full-year basis in 2009.
Valuation: Our target price of $19.25 reflects a weighted average valuation approach: 15x 2007E diluted EPS of $1.17 (12.5%), 1.4x 2007E BV of $13.03 (12.5%), and a target yield of 4.5% (75%), assuming 2007 dividends per share of $0.89.
Recommendation: We believe that the shares are reasonably valued. Our rating is Market Perform.