Meridian Energy's Investor Day Springs No Surprises, Fair Value and Estimates Remain Intact

Meridian Energy held an analyst briefing for investors recently. Management discussed various issues, the most notable ones being transmission pricing, retail strategy, future demand-supply dynamics and its long-term maintenance capital expenditure program. However, there were no real standouts or surprises from the meeting to change our outlook or thesis on the company. Consequently, we have left our forecasts and fair value estimate unchanged. Our narrow economic moat rating on the company also remains intact. Meridian's share price of NZD 2.45 appears slightly overvalued compared with our fair value estimate of NZD 2.20 per share as the market expects a higher earnings growth trajectory than what is implied by our projections. The share price is also implying a positive outcome from the transmission pricing review. That said, the stock is trading at a solid dividend yield of 7.7%, with management announcing generous capital returns of NZD 125 million per annum on average. We think that will continue to be stock price supportive.