Royal Bank Take on AltagasIncreasing our EPS estimates and price target We have increased our 2021 and 2022 EPS estimates while reducing our EBITDA estimates. Details are as follows: EPS: Our new 2021 and 2022 EPS estimates are $1.80 and $1.83, respectively (up from $1.58 and $1.73, respectively) with the higher estimates primarily due to the strong Q1/21 results, a lower effective tax rate and lower depreciation expense.
EBITDA: Our 2021 and 2022 EBITDA estimates are $1.497 billion and $1.557 billion (down from $1.509 billion and $1.594 billion) with the reduction primarily driven by a weaker U.S. dollar (we are using an FX rate of $1.23 in 2021 versus our previous assumption of $1.27; of note, guidance incorporates an FX rate of $1.26). AFFO/share (utility-adjusted): We have increased our 2021 AFFO/share (utility-adjusted) estimate to $2.60 (up from $2.47), primarily as a function of the Q1/21 results that were above our estimates, lower interest expense, reduced expected contribution from U.S. assets due to a weaker U.S. dollar, and increased cash taxes. Our 2022 AFFO/share estimate moves modestly lower to $2.72 (down from $2.74), primarily reflecting a weaker U.S. dollar, offset somewhat by reduced forecast interest expense. We have also increased our price target to $26.00 (up from $22.00) based on our sum-of-theparts valuation as shown in Exhibit 6. The higher price target is primarily driven by two factors that impact the Utilities segment valuation: (1) with the rally in gas utility valuations since February when AltaGas reported Q4/20 results, we are using an 18-20x P/E valuation for the business (previously 17-19x); and (2) our prior valuation used only the regulatory capital structure, and our new valuation benefits from "double leverage" that almost all utilities employ. These changes are