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Market Price (2/26/2016): $95.56/share; ST-Target: $140/share; NIV: $217/share
SRE: So much more to come
Going forward, SRE is expected to grow dividends between 8%-9% to match it AEPS growth. SRE is pursuing a sale and purchase agreement for Cameron LNG train 4 and is in the midst of negotiating final contracts with customers. FID is expect by yearend 2016, and we fully expect Cameron train 4 to be built. We are also inclined to believe that train 5 will also get built and Port Arthur LNG 1&2 is likely to be some of the last liquefaction plants that get built in the continental US for quite some time. We like SRE’s Mexico plan and we are of like mind with SRE’s view on Mexican deregulation: It’s been a long-time coming but it’s finally here and low commodity prices are helping to push deregulation. SRE announced that it’s bidding on three more pipeline projects in Mexico. Aliso Canyon should be back in service sometime within 2016 and other than the lawsuit, the emergency is largely behind SRE, in our opinion, We like SRE’s focus on renewable investments too. We believe demographics will continue to improve as well, and SRE’s long-term outlook of a CAGR in AEPS of 11%-15% may be conservative.