RBC maintains an "outperform" but lowered SP target to $59NICK OXFORD/REUTERS
DAVID LEEDER PUBLISHED DECEMBER 13, 2017UPDATED
The additional details and enhanced disclosures given by Enbridge Inc. (
ENB-T,
ENB-N) for its strategic plan at its Investor Day event in New York on Tuesday provide a floor for its shares, according to RBC Dominion Securities analyst Robert Kwan, who sees upside potential in the first half of 2018.
Mr. Kwan said Enbridge reiterated the core messages from the Nov. 29 announcement of the plan and financial outlook, including "10-per-cent dividend growth CAGR [compound annual growth rate] through 2020 that is supported by a similar growth rate in ACFFO [available cash flow from operations] per share, a rationalization of the asset mix into three core business lines (liquids pipelines, gas transmission, and gas utilities), and a funding plan that would require no additional follow-on common equity."
"Following the recent roughly $2-billion of common equity issued (ENB and ENF) and the $0.5-billion preferred share issue, Enbridge updated its consolidated funding plan through 2020, which includes the previously-announced plan to sell a minimum of $3-billion of assets in 2018 as well as another $3.5-billion of hybrids," said Mr. Kwan. "Further, we liked the commentary with respect to proactively looking to utilize the hybrid financing window in 2018."
Though he remains "comfortable" with his 2017 and 2018 ACFFO per share estimates of $3.62 and $4.27, respectively, Mr. Kwan thinks his 2019 projection was too high, lowering his expectation to $4.47 from $4.75 based on a lower volume assumption for it Mainline pipeline system as well as concerns about the timing of new projects.
Mr. Kwan said the message coming from the event y was "positive on balance," however he lowered his target price for Enbridge shares to $59 from $63. The analyst average target price is $58.07, according to Thomson Reuters data.
He maintained an "outperform" rating.