Stocks’ Details
 

APA Group

Priced Senior Unsecured Notes: APA Group (ASX: APA) is the largest natural gas infrastructure business in Australia, and the market capitalisation of the company stands at $13.17 Bn as on 30^th April 2020. APA recently announced that it has priced an offering of EUR 600 million of senior unsecured notes in the European debt capital markets with respect to Regulation S under the US Securities Act. These notes will be issued by APA Group’s wholly owned borrowing entity APT Pipelines Limited. The company would utilise the proceeds for repayment of debt maturing in July 2020, and for general corporate purposes, including possible pre-funding of future debt maturities.  The below picture gives an overview of financial performance for 1H FY20:


Financial Performance (Source: Company Reports)

Revised Guidance for FY20: Considering the delays in commissioning of the Orbost Gas Processing Plant, and uncertainties from COVID-19, the company has revised its EBITDA guidance to be in the range of $1,635 million - $1,655 million.

Valuation Methodology:Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company possesses a strong liquidity position comprising cash and committed undrawn facilities of $1.2 billion. APA also has $9.3 billion of committed drawn debt facilities, with an average remaining tenor of 6.1 years. We have valued the stock using Price to cash flow multiple based illustrative relative valuation method. For the purpose, we have taken peers such as Contact Energy Ltd (ASX: CEN), Genesis Energy Ltd (ASX: GNE) and Mercury NZ Ltd (ASX: MCY), and arrived at a target price with an upside of high single-digit (in percentage terms). Therefore, considering the strong liquidity position and recent fund raising, we maintain a “Hold” rating on the stock at the current market price of $10.920 per share, down by 2.151% on 30^th April 2020.

Meridian Energy Limited

Announcement for Buyback:Meridian Energy Limited (ASX: MEZ) is engaged in generation and retailing of electricity. The market capitalisation of the company stood at $11.66 Bn as on 30^th April 2020. MEZ, recently notified the market that it would commence an on-market share buyback to purchase a maximum of 409,668 ordinary shares pursuant to FY20 LTI Scheme. However, the company will only acquire shares on the NZX Main Board. This buyback might occur from 1 May 2020 until 29 May 2020. In the March 2020 report, the company stated that national hydro storage has decreased from 111% to 94% of the historical average, in the month to 9^th April 2020. Its monthly total inflows were 79% of the historical average. The company added that national electricity demand in March 2020 witnessed a decline of 2.0% on March 2019, due to COVID-19.


National Demand (Source: Company Reports)

Focus for Growth:MEZ is focused on the development of renewable electricity generation opportunities in New Zealand. The company will also continue to advance its renewable generation development.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

EV/Sales Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Net margin of the company stood at 10.7% in 1H FY20, which is in line with the industry median. The stock of MEZ has corrected by 7.12% in the last three months. We have valued the stock using EV to Sales multiple based illustrative relative valuation method, and for the purpose, we have taken peers such as Mercury NZ Ltd (ASX: MCY), AusNet Services Ltd (ASX: AST), Contact Energy Ltd (ASX: CEN) etc. We have arrived at a price correction of mid-single digit (in percentage terms). Based on the above-stated factors, we have a wait and watch stance on the stock at the current market price of $4.340 per share, down by 4.615% on 30^th April 2020.

Infratil Limited

Well Positioned in Scalable High Growth Sectors:Infratil Limited (ASX: IFT) owns and operates businesses in the energy, transport, data infrastructure and social infrastructure sectors. The market capitalisation of the company stood at $2.87 Bn as on 30^th April 2020. The company recently announced that Fisher Funds Management Limited has become a substantial holder in the company with voting power of 5.012%. IFT stated that a diversified portfolio, along with overweight positions in renewable energy generation and data infrastructure, is well placed to outperform during a sustained slowdown in economic activity. The company is also placed well in scalable high growth sectors with good jurisdictional diversification.


Investments (Source: Company Reports)

Revised Guidance for EBITDAF: The company expects data and renewable energy platforms to generate portfolio returns in the upcoming period. For FY20, it expects Underlying EBITDAF in the ambit of $550 million - $560 million.

Valuation Methodology: P/BV Multiple Based Relative Valuation

P/BV Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company has a robust capital position and flexibility throughout the group with the ability to defer discretionary capital investment or re-prioritise cashflows. IFT has made significant capital investments in Tilt Renewables, Longroad Energy and CDC Data Centres, which are on track to be income-generating in FY21. We have valued the stock using P/BV multiple based illustrative relative valuation method and arrived at a target price with an upside of high single-digit (in percentage terms). Thus, considering the strong capital position, investments and valuation, we maintain a ‘Hold” recommendation on the stock at the current market price of $4.290 per share, down by 1.379% on 30^th April 2020.

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.