北美能源公用事业:水的估值很高,但是否已经过热了.docx

北美能源公用事业:水的估值很高,但是否已经过热了.docx

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时间:2020-07-29

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1、CORENorthAmericaPower&UtilitiesWatervaluationsarehot,buthaveINITIATINGCOVERAGEEquityResearch15July2020theyboiledover?WeinitiatecoverageonAWKandWTRGwithEqualWeightratings:Watervaluationshaveseeminglylostallcorrelationtoelectricandgasutilities,asthegroupP/Emultiplehasexpandedtoa~10-turnpremium.

2、However,weseelittleevidenceofthespreadcontractingnearterm,asweviewinvestorexpectationsasreasonableandnear-termearningsheadwindsasscarce.Increasingrelianceonratecasesthroughouttheforecastperiodrepresentthelargestsector-wideriskfactorthroughour2022forecasthorizon,butcustomerbilloffsetsexistforsom

3、e,andoverallcustomerbillinflationappearspalatable.ScarcityvalueandESGnarrativelikelytodrivepremiumforforeseeablefuture,inourview:Regardlessoffundamentalsimilaritiestoelectricandgasutilitycounterparts,weexpectthewaterpremiumtopersistasscarcityandindexcompositiondriveownershipdiversityandsupportw

4、atervaluationsfortheforeseeablefuture.WaterutilitiesalsobenefitfromtheirlackofelectricgenerationexposurethatdisqualifiessomeutilitiesonESGscreens,andweseeincreasedenvironmentalregulationonwaterqualitycoupledwithfairmarketvaluelegislationasaddingacompellingqualitativeESGnarrativeasinvestor-owned

5、waterutilitiesprovideneededfinancingforcash-strappedpublicagencies,particularlyfollowingtheimpactofCOVID-19onpublicbudgets.RecentexecutionandindustrytailwindslikelymeanEPSCAGRsmoderatesomewhat,butgrowthbacklogandvisibilitystillexceedelectricpeers:AWKandWTRGpossessuniquescalethatpositionbothtopl

6、ayleadingrolesinanationalwaterinfrastructurereplacementcycleintheUS.Chronicunder-investmentinwaterinfrastructurehasledtheAmericanSocietyofCivilEngineerstoestimatethat$1tnoftotalinfrastructurespendingisneededoverthecoming25yearstorepairandreplaceaginginfrastructure.Themarketpositiondominanceisun

7、matchedintheelectricutilityspace(NEEisprobablyclosestwithNEER).Weseethescaleadvantageandreputationforbest-in-classmanagementprovidinggreaterconfidenceandvisibilityintocapitaldeploymentandgrowth.Externalfinancingneedslikelyincrease

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