TransAlta Corp T.TA

RE:Analyst Ratings?

[stockboy9]

Still 14: TransAlta Corporation Utilities - Energy Infrastructure (TA-T,TAC-N) 24Jul15: $9.08 1-Year Target: $14.00 Div. (NTM): $0.72 Div. (Current): $ 0 . 7 2 Rating: Sector Outperform 1-Year ROR: 62.1% Yield (Current): 7.9% Qtly EBITDA (M) (Next Release: 29-Jul-15) Year 2014A $310A $213A $212A $301A $1,036 2015E $275A $215 $232 $293 $1,015 2016E $1,020 2017E $1,083 Industry Specific 2013A 2014A 2015E 2016E 2017E FCFPS $0.57 $1.08 $1.01 $0.95 $1.02 CFPS $2.62 $2.65 $2.73 $2.74 $2.82 EBITDA (M) $1,023 $1,036 $1,015 $1,020 $1,083 Total Debt + Preferreds (M) $5,103 $4,998 $5,034 $5,059 $4,934 Enterprise Value (M) $9,193 $8,442 $8,366 $8,422 $8,231 Mar Jun Sep Dec Capitalization Market Cap (M) $2,531 Net Debt + Pref. (M) $5,007 Enterprise Value (M) $8,329 Shares O/S (M) 279 Float O/S (M) 278 Control Blocks Widely held Source: Global Insight, Inc. Valuation: 6 . 8% 2016E Free Cash Yield and 9.7x 2016E EV/EBITDA Key Risks to Target: Power Prices; Interest Rates; Environmental Regulations; Re-contracting Financial Analysis December-31 2011A 2012A 2013A 2014A 2015E 2016E 2017E 11-14 14-16 Average Growth Per-Share Data (Basic) Adj Earnings $1.04 $0.50 $0.31 $0.25 $0.21 $0.25 $0.39 -0.5% Earnings $1.31 $-2.62 $-0.27 $0.52 $0.14 $0.18 $0.26 -40.8% Free Cash Flow $1.88 $0.91 $0.57 $1.08 $1.01 $0.95 $1.02 -6.5% Dividends $1.16 $1.16 $1.16 $0.72 $0.72 $0.72 $0.72 0.0% Shares O/S (M) 223.6 254.7 268.2 275.0 283.0 291.0 299.0 2.9% Valuation Ratio Price/Earnings 20.3x 30.2x 43.6x 42.2x 43.3x 36.7x 23.2x 31.6 Price/Cash Flow 5.8x 6.2x 5.1x 4.0x 3.3x 3.3x 3.2x 5.4 EV/EBITDA 8.9x 9.0x 9.0x 8.1x 8.2x 8.3x 7.6x 9.0 Dividend Payout 112% 232% 376% 289% 344% 291% 184% 225% Payout Ratio 62% 128% 205% 67% 71% 76% 71% 105% Profitability Revenues (M) $2,451 $2,262 $2,394 $2,621 $2,360 $2,421 $2,567 -3.9% EBITDA (M) $1,078 $1,015 $1,023 $1,036 $1,015 $1,020 $1,083 -0.8% Adj Earnings (M) $232 $127 $83 $69 $59 $72 $117 2.4% Earnings (M) $293 $-666 $-72 $142 $40 $53 $79 -39.1% Cash Flow (M) $815 $623 $704 $730 $772 $797 $843 4.5% Debt Analysis Debt/EBITDA 3.7x 4.2x 4.2x 3.9x 4.0x 4.0x 3.7x 4.1 EBITDA/Int. Exp 5.0x 4.2x 4.0x 4.1x 4.8x 5.4x 5.8x 4.5 LTD/(LTD+Equity) 0.53 0.56 0.56 0.51 0.50 0.50 0.50 -0.9% Tot. Debt/(Tot.Dbt+Eq.) 53% 56% 56% 51% 50% 50% 50% 54% Capital Structure Enterprise Value (M) $9,608 $9,152 $9,193 $8,442 $8,366 $8,422 $8,231 -0.1% Total Assets (M) $9,760 $9,451 $9,783 $9,833 $9,973 $9,930 $9,751 0.5% Total Debt (M) $4,037 $4,217 $4,322 $4,056 $4,092 $4,117 $3,992 0.7% Common Equity (M) $2,707 $2,229 $2,125 $2,342 $2,423 $2,419 $2,437 1.6% Preferreds (M) $562 $781 $781 $942 $942 $942 $942 0.0% Total Capital (M) $7,664 $7,557 $7,745 $7,934 $8,234 $8,208 $8,047 1.7% Company Profile TransAlta Corporation (TA) is a leading Alberta power company and Canadas largest private renewable power owner/operator. Coal-fired power still makes up about half of TA's roughly 9,000 MW of net owned capacity. TA has long been engaged in private wind-power development and owns about 800 MW of utility hydro assets in Alberta, which are now unregulated. In August 2013, an ownership interest in most of the companys 1,256 MW of wind power was spun out by way of an IPO into RNW (TA maintains 70% ownership in RNW). This structural shift provides a drop-down vehicle for future growth at the top company while creating value for RNW owners by way of accretive acquisition. Business Mix (Based on revenues unless otherwise noted) '15E EBITDA: 65% Thermal Power, 20% Wind, 10% Hydro, 5% Marketing & Other Comparable Companies (TSX unless otherwise noted) CPX .Recent Update Text as of 22JUL15 Concerns around the value of TA's Alberta coal plants have caused further . weakness in the share price. The stock is now reflecting a "silly low" value on the Alberta coal plants, assuming our estimated asset values for contracted gas-fired and renewables are . accurate. Getting down to a $9 NAVPS would imply a ~$1.2B net asset value on the Alberta coal. Putting that in perspective, their value amounts to a 3.3x multiple of . current EBITDA. Amplifying the point (and "silliness"), if Alberta power prices were to hit $75/ MW-hr post-2020, the coal plants could realize almost the entire $1.2B of EBITDA in a single year. Alberta prices averaged $80/MW-hr in 2013 when natural gas prices were only $3/mmBtu. . We recognize the unusual amount of uncertainty surrounding the regulatory framework around TA's coal plants. However, we think the market is probably discounting a worst case. Value investors should accumulate at these levels, in our opinion. Matthew Akman, MBA (Scotia Capital Inc. - Canada) [e-mail] / [phone] EDGE For Reg AC and important disclosures please visit www.gbm.scotiabank.com/disclosures Scotiabank GBM Analysts employed by non-U.S. affiliates are not registered/qualified as research analysts with FINRA in the U.S.