Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

APA Group (ASX: APA) is in the energy infrastructure business, and its activities include gas transportation and storage, gas distribution, asset management, renewable and gas-fired power generation, and other energy services.

 1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~33.81% of the total shareholding. UniSuper Limited and The Vanguard Group, Inc. are holding a maximum stake in the company at ~12.52% and ~5.00%, respectively.

1.4 Key Metrics: The company has reported a high net margin of 9.6% in FY22 compared to the industry median of 8.7%. Further, the cash cycle days improved in FY22 to 26.5 days relative to 34.7 days in FY21. Below is captured the trend of the operating margin and current ratio:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Results Highlights of FY22: During FY22, the company reported profit after tax of AUD 259.71mn compared to AUD 0.73mn in FY21. Further, APA recorded a growth in net cash flow operating activities which increased from AUD 1,050.95mn in FY21 to AUD 1,197.26mn in FY22 due to tariff escalation.  

2.3 Investing in Sustainable Future: The company aims to achieve sustainable targets by driving investments in renewable power generation and sets nominal expenditure of approx. AUD 150-170mn for FY23-30 pathway. The company expects to set its scope 3 target by the next climate transition plan in 2025.

2.4 Dividend History: The company declared the final dividend of AU 28.0 cents per share, bringing the full-year dividends to AU 53.0 cents per share by maintaining a target payout ratio of 60-70%.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: Price/Cash Flow Per Share Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is November 3, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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