cibc analyst target $47CA outperformerQ1 2020 First Look: Strong Quarter And DCF Guidance Maintained The company reported adjusted EBITDA of $3.76B vs. our estimate of $3.55B and consensus of $3.60B. Reported DCF/share was $1.34 vs. our estimate of $1.18 and consensus of $1.29. The company reiterated its guidance for DCF/share of between $4.50 - $4.80, while capex was reduced modestly to $10.0B of secured growth capital, reflecting the sale of 49% of its 50% interest in a French wind farm. $1B of capital has also been deferred from 2020 to 2021. The company’s secured capital plan remains self-funded. The biggest questions facing Enbridge relate to the depth and duration of the decline in energy demand due to COVID-19 and its impact on operations, including Mainline volumes. To that end, the company gave very detailed indications, including an expected volume decline of 300 MBbl/d from Q2 through year-end, representing about 3% of EBITDA. This compares to our estimate of a decline averaging 400 MBbl/d. April saw declines of 400 MBbl/d, and recovery is expected in Q3 and Q4. This path is similar to our expectations, however, we have assumed a 600 MBbl/d decline in Q2, eventually recovering in H2/21, for an average decline of 400 MBbl/d for the balance of 2020. Other Highlights: $300MM of cost savings through company-wide compensation reductions, including 10% at the executive level, and 15% for the CEOand Board of Directors. Secured $3B of new credit facilities, and liquidity stands at $14B. L3R: the MPUC recently reinstated the Certificate of Need and Routing Permit. State and federal environmental agencies are advancing the permitting process, including the issuance of the draft 401 Water Quality Certification by the MPCA, and completion of the relevant public consultation processes. Public comments are being reviewed. The company filed a response to intervenor requests that the CER delay the Mainline contracting filing. The company filed for all major environmental permits for the Line 5 tunnel project. The company took a non-cash impairment to its investment in DCP Midstream of $1.7B and $2B for non-cash unrealized derivative fair value losses.Price Target Calculation
We reiterate our Outperformer rating as well as our price target of $47 using an EV/EBITDA multiple valuation approach. We are basing our valuation methodology on peer group analysis and a discount to historical trading ranges. We calculate our price target by applying a 12x EV/EBITDA multiple on 2021E EBITDA, using debt of $83.3B.