Seven Stocks in the Utility Sector

DUET Group

DUE Details
Expanding debt flexibility: DUET Group (ASX: DUE) recently took a note that Multinet Gas confirmed contract close of a $300 million 7-year bank debt facility which will be applied to refinance term debt maturing in 2017. As per DUE, the transaction concluded the group’s refinancing program for 2016. The group has been able to raise and refinance $1.4 billion of term debt with new tenors of 5, 7 and 10 years and reduced the maturing debt facility limits in 2017 from $1.63 billion down to $477 million, since the financial results announcement in August. Lately, DUE refinanced $500 million of term debt facilities that would mature in the first half of 2017. Moreover, DUE reported a 29.1% growth in the revenues from ordinary activities in FY 16 and 153.5% growth in NPAT excluding significant items.

 

FY 16 Financial Performance (Source: Company Reports)
 
Trading at a solid dividend yield, we give a “Hold” recommendation on the stock at the current price of $ 2.35

 
DUE Daily Chart (Source: Thomson Reuters) 

Spark Infrastructure Group

SKI Details
Tribunal has upheld AER’s final determination on all grounds: Spark Infrastructure Group (ASX: SKI) reported the underlying profit before loan note interest and tax has fallen by 9.4% to $127.2 million in the first half 2016 as compared to the corresponding period 2015. The fall in the underlying profit is due to the lower equity accounted share of profits from SA Power Networks (SAPN) and Victoria Power Networks (VPN) who have been operating under the revenue allowances provided in their Preliminary Determinations for the first year of their new regulatory periods. However, SKI has posted a 31.6% growth in the statutory net profit after tax to $51.6 million and has declared the interim distribution of 7.25cps, which is in line with the FY 2016 guidance of 14.5cps. On the other hand, The Australian Competition Tribunal has upheld the AER’s final determination on all grounds, declared its Limited Merits Review (LMR) of the Australian Energy Regulator’s (AER) Final Determination for SA Power Networks for the period 2015-2020. We give a “Buy” recommendation on this dividend yield stock at the current price of $ 2.20

 
SKI Daily Chart (Source: Thomson Reuters) 

AusNet Services Ltd

AST Details
Draft Decision would result in a negative revenue adjustment in calendar year 2018: AusNet Services Ltd (ASX: AST) is analyzing the Draft Decision published by The Australian Energy Regulator (AER) regarding the Transition Charges Application, which is governed under the AMI Cost Recovery Order in Council and relates to excess expenditure incurred in CY2014 and CY2015 as compared to the AER Approved Budget in those years. Moreover, the Draft Decision would lead to a negative revenue adjustment in calendar year 2018 of $62.1 million against the EDPR 2016-20 Final Decision. AST stock fell over 6.23% in the last six months (as of November 07, 2016), while we give an “Expensive” recommendation on the stock at the current price of $ 1.49 

 
AST Daily Chart (Source: Thomson Reuters) 

APA Group

APA Details
Decent dividend yield: APA Group (ASX: APA) has issued A$200 million 7-year fixed rate A$ Medium Term Notes to Australian and international institutional bond investors. The notes are priced at a margin of 180 basis points above the benchmark and will be used to refinance the existing facilities ahead of the maturity and reduce debt costs in the longer term.

 

FY16 Results (Source: Company Reports)
 
The group in its AGM revealed for mixed results for FY16 wherein NPAT dropped owing to higher depreciation and amortisation charges related to Wallumbilla Gladstone Pipeline while operating cash flow has been the value driver. APA stock has a decent dividend yield while we give a “Buy” recommendation on the stock at the current price of $ 7.95

 
APA Daily Chart (Source: Thomson Reuters) 

AGL Energy Ltd

AGL Details
Decrease in gas portfolio EBIT: AGL Energy Ltd (ASX: AGL) expects the underlying profit to be between $720 million and $800 million in FY 17 driven by better wholesale electricity margins, coupled with ongoing execution of the customer value strategy and the delivery of operational transformation targets.

 


FY 16 Financial Performance (Source: Company Reports)
 
On the other hand, the group earlier disclosed challenges related to the unseasonably mild weather in July/August and anticipated reduction in gas portfolio EBIT of at least $100 million as compared with FY16. Additionally, AGL has announced the change to its dividend policy and an on-market share buy-back. We believe that the stock is “Expensive” at the current price of $ 19.69

 
AGL Daily Chart (Source: Thomson Reuters) 

Water Resources Group Ltd

WRG Details
Made a Loss in FY 16: Water Resources Group Ltd (ASX: WRG) estimated the December quarter cash outflows of $A30,000 at the back of administration and corporate costs. Moreover, WRG has reported an earnings loss per share of 0.16 cents in FY 16 as compared to the earnings per share of 0.008 cents in FY 15.

 

FY 16 Financial Performance (Source: Company Reports)
 
The group will conduct its AGM on November 24, 2016. Meanwhile, stock fell over 33.3% in this year to date (as of November 07, 2016) and still we give an “Expensive” recommendation on the stock, given the limited growth prospects, at the current price of $ $ 0.002

 
WRG Daily Chart (Source: Thomson Reuters)

ERM Power Ltd

EPW Details
Subdued Profit in FY 16: ERM Power Ltd (ASX: EPW) reflected the earnings of $81.2 million in FY 16 due to the business transition and investment. The underlying NPAT fell 41% year on year (yoy) to $19.2 million due to the reduction in earnings of Oakey Power Station, which operated for its first full year as a merchant facility after previously being on a long-term offtake agreement.

 

FY 16 Financial Performance (Source: Company Reports)
 
Moreover, EPW’s board is undergoing many changes including the retirement of Martin Greenberg from the board. Looking at the above, we give an “Expensive” recommendation on the stock at the current price of $ 1.12

 
EPW Daily Chart (Source: Thomson Reuters)  

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