Enbridge Upgraded To Outperform At Credit Suisse

In a report published Monday, Credit Suisse analyst Andrew M. Kuske upgraded the rating on Enbridge Inc ENB from Neutral to Outperform, while maintaining the price target at C$70.

Enbridge's share price has declined almost 10 percent in about a month. Analyst Andrew M. Kuske mentioned three factors that have exerted pressure on the company's share price:

• The strong relative outperformance of the stock reversed to more in line
• The rise in yield of Canadian 10-year bonds by about 40bps in a few weeks
• Concerns related to political change in Alberta

"In our view, the stock market reaction is a bit disproportionate to these factors and we believe a very interesting opportunity exists ahead of the filing of the circular (likely in June) relating to the ENB-Enbridge Income Fund dropdown," the report said.

"Enbridge's dropdown plan is slightly different than most US approaches and uniquely Canadian. A variant may provide strategic flexibility, however, we believe valuations should be viewed in relation to the US MLPs, various midstream comps and, given the structure, some of the alternative asset managers," Kuske wrote.

Enbridge has "significant and visible" growth prospects until 2018. Although growth is less clear beyond 2018, the company may opt for M&A. Enbridge is a core holding with "one of North America’s largest infrastructure footprints," Kuske added.