ISI Group Reiterates Hold Rating, $33 PT on Ameren Corp.

In a report published Friday, ISI Group reiterated its Hold rating and $33.00 price target on Ameren Corp. (NYSE: AEE).ISI Group noted, “The decision to exit the Merchant Generation business is positive but it doesn't change our historic view of the value proposition- growth and improved returns in the core regulated businesses. Ameren is making $5.8bn of utility capital investments in Illinois and Missouri from 2013-‘16, with nearly 25% of the capex earmarked for transmission in Illinois and independent transmission projects at Ameren Transmission (ATX). We believe the company will earn an average of ~9.8% return on equity in rate base in IL and MO from '13- '15 on rate base growth averaging 4-5% over that period. ATX rate base grows from essentially zero to ~$500m by 2015 and potentially +/- $1.2bn through the end of the decade. ATX's growth potential doesn't appear reflected in the stock price. At current levels, AEE appears modestly undervalued, as investors could see ~11% price upside plus an above average dividend yield of 5.26%. Our target price remains $33/share.”Ameren Corp. closed on Thursday at $30.59.