TSX Commentary » TransCanada Corp.

TransCanada Corp. TRP Long-Term Outlook Intact

admin — Wed, 24 Feb 2010 17:35:46 +0000

TransCanada Corp. (TRP) – $34.93 – Long-Term Outlook Intact
Outperform, Average Risk, Price Target: $41.00
Normalized Q4/09 EPS was $0.48 compared to RBC CM estimate of $0.52 and $0.46 in Q4/08. Lower than forecast Power contribution (mostly realized prices) was partially offset by lower-than-expected interest expense. TRP raised its annual dividend by $0.08/share to a new annualized rate of $1.60/share, which is in line with RBC CM’s estimate. After reviewing its financial forecast, RBC CM modestly reduced its EPS estimates for 2010 and 2011 to $2.09 and $2.40, respectively (from $2.12 and $2.45, respectively). On an absolute basis and also relative to the level of 10-year GoC bond yield, RBC CM believes that the shares of TRP represent good value trading at current levels.

TransCanada Corp. TRP Alaska Pipeline Project Files Open Season Plan

admin — Mon, 01 Feb 2010 17:16:33 +0000

TransCanada Corp. (TRP) – $34.17 – Alaska Pipeline Project Files Open Season Plan
Outperform, Average Risk, Price Target: $41.00
TransCanada and ExxonMobil filed an open season plan for the Alaska Pipeline project with the FERC. TransCanada and ExxonMobil have proposed two projects: (1) a 4.5 Bcf/day pipeline from the North Slope to the Alaska-Yukon border, where it will connect with a Canadian line into Alberta; and (2) a 3.0 Bcf/day line from the North Slope to Valdez for liquefaction and export. Both projects could be in-service by 2020, although only one project is likely to move forward. The estimate for the pipeline from the North Slope to Alberta is in the range of US$32 billion to US$41 billion (in 2009 dollars). For the pipeline to Valdez, the estimated cost is US$20 billion to US$26 billion (not including the liquefaction facility). Both estimates include a new gas treatment plant to be built in Prudhoe Bay. The open season plan filed with the Federal Energy Regulatory Commission (FERC) envisions a 90-day open season starting at the end of April and ending in July 2010. There will be a concurrent, but separate, open season process for the Canadian portion of the project. The open season is in line with the requirements under the Alaska Gasline Inducement Act (AGIA). RBC CM believes that the success of the project hinges on the producers and the government coming to an agreement on various financial issues (e.g. royalties). From a TransCanada standpoint, the project to Alberta is much better for shareholders as it has the added benefit of increasing supply for the existing pipeline system. RBC CM is maintaining its current valuation, due to the uncertainty regarding the project, as well as the long potential in-service date. The target price for TransCanada remains $41.00, based on a forward P/E of 16.5x.

CIBC top picks for 2010

admin — Wed, 13 Jan 2010 16:24:36 +0000

Top Picks Of 2010
Ticker Company Rating Price Target
VNP 5N Plus, Incorporated Sector Outperformer $7.50
BPP BPO Properties Ltd. Sector Outperformer $21.00
CNR Canadian National Railway Company Sector Outperformer $65.00
EGO Eldorado Gold Corporation Sector Outperformer US$20.00
EMP.A Empire Company Limited Sector Outperformer $59.00
FM First Quantum Minerals Ltd. Sector Outperformer $115.00
FNV Franco-Nevada Corporation Sector Outperformer $46.00
MIC Genworth MI Canada Inc. Sector Outperformer $30.00
HR.UN H&R REIT Sector Outperformer $19.00
MN March Networks Corp. Sector Outperformer $7.00
PAAS Pan American Silver Corp. Sector Outperformer US$41.00
SJR.B Shaw Communications Sector Outperformer $24.00
SU Suncor Energy Inc. Sector Outperformer $44.00
TKO Taseko Mines Limited Sector Outperformer–Speculative $5.90
TOT Total Energy Services Sector Outperformer $8.00
TRP TransCanada Corp. Sector Outperformer $42.00

Source: CIBC World Markets Inc.

TRP committed capital program will yield significant bottom line

admin — Thu, 19 Nov 2009 22:38:56 +0000

At TRP’s annual Investor Day, management went to great lengths to leave
investors with the message that the large committed capital program for
2009-2013 will begin to yield significant bottom line growth starting in
2011. This is consistent with our view and earnings forecasts (unchanged).
Committed capital expenditures from 2010 through 2013 amount to $16
bln., with the bulk of that ($11.2 bln.) in 2010/2011. Management affirmed
that there are no plans for equity funding in 2010/2011. Thereafter,
incremental cash flow should remove the need for new equity through 2013.
Management provided EBITDA guidance, consistent with our forecasts, that
indicates the bottom line will begin to accelerate in 2011. Our corresponding
EPS forecasts are as follows: 2009E-$2.06, 2010E-$2.10, 2011E-$2.41,
2012E-$2.45, 2013E-$2.95.
The back-end loaded EPS growth for 2009-2013 implies an opportunity to
acquire the stock at attractive valuations. 2013 EPS and net free cash flow
forecasts suggest a $55-$60 share price in the next 3 years. Patience,
however, may be required as the company works through 2010.

TRP Focusing on Project Growth

admin — Thu, 19 Nov 2009 22:28:40 +0000

TransCanada held a well-attended Investor Day in Toronto. RBC CM believes management is keenly aware of the market’s aversion to the further issuance of common shares. Common shares were not even listed as an option for potential funding sources for the 2010/2011 capex plan. Further, commentary during the sessions and RBC CM’ additional discussions with management indicate that acquisition-driven common share issuance is highly unlikely. Management provided an EBITDA outlook through 2013 that shows EBITDA growth from roughly $4 billion for 2009 to about $6.5 billion in 2013. From a regulatory perspective, the company would be allowed to raise the Mainline’s toll into Eastern Ontario from roughly $1.25/GJ to $1.75/GJ for 2010. However, management appears willing to work with shippers to reduce the magnitude of the toll increase in the near-term until additional volumes from the Montney and the Horn help improve throughput on the system. RBC CM continues to believe that the stock’s valuation remains compelling, particularly for long-term investors and/or investors looking for a low-risk way to play an outlook for higher natural gas prices, which would lead to higher power prices. Even if the gas price doesn’t improve, patient investors could still expect growth in EPS beginning in 2011 due to the continued ramp-up from Keystone along with the commissioning of other new projects.