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AGK, AGL ENERGY LIMITED
nipper
post Posted: Mar 1 2013, 11:17 AM
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In Reply To: nipper's post @ Feb 28 2013, 07:43 AM

Brokers gave AGL Energy ((AGK)) the thumbs up after the interim results. The electricity and gas utility impressed with stable earnings and margin improvement as well as customer wins.

Retail provided the best outcome for several brokers with AGL clearly in front of competitors, gaining customers and maintaining margins. AGL has stated it will cease the door knocking customer acquisition strategy in NSW and Victoria, believing a better margin outcome is obtained through re-investing in winning back customers. Credit Suisse is not so sure and will be looking to confirm the margin outcome has been maintained in the second half.

Macquarie highlighted the gross profit increase of 18% in electricity against an average price increase of 22% per megawatt hour and revenue increase of 26%. The broker notes only a limited amount of the increase was given away through discounting, despite the intense competition in the market place. The headline result for retail appeared weak but this reflected timing of carbon price billing and changes to transfer pricing. Credit Suisse expects this will be recovered with a weighting to the second half.

On the merchant side, brokers welcomed the robust contribution from AGL's recently acquired Loy Yang A power station. Credit Suisse estimates Loy Yang A contributed around $182m to the result and this was a respectable outcome given the hedge book pressures experienced by other retailers. On the matter of the hedge book, Deutsche Bank finds the company has learned from past mistakes. Recent high electricity prices in Queensland from weather events and transmission constraints have affected profitability across the sector but AGL's exposure is muted. The company anticipates an adverse impact of around $10m (pre-tax) which highlights the sound positioning of the electricity hedge book. Deutsche Bank noted AGL suffered a profit downgrade in FY11 from similar issues with Cyclone Yasi and has adjusted its hedge book accordingly.

AGL's gas contracting position is a source of concern for Deutsche Bank. The contract position (from the Cooper Basin and offshore Victorian contracts) falls from around 250PJ to 80PJ across 2017-18. Increased upstream activity can mitigate this but, with increased regulation of the CSG industry, the potential exposure to higher third party gas prices is a source of risk, the broker maintains. For Credit Suisse too this is a concern, noting management is relying on this gas shortfall to come from contracts with Victorian producers given the constraints in NSW.

For Macquarie, uncertainty will come later in FY16 when soft carbon and non-carbon prices weaken earnings. Here, gas will be the key to profit growth as the underlying price increases. In the meantime, gas is a frustrating business. The NSW CSG decision process remains fraught. Macquarie notes the Gloucester project will now take one more year than was factored in and, while only minor additional approvals are needed, this is a sensitive issue and there is risk with further delays.

The NSW zoning plans, if implemented, mean AGL's Hunter and Camden North projects would not proceed. Gloucester has some wells within 2km of residences but will go ahead as approvals have been granted at both state and federal levels. The company has flagged a writedown of around $250 million if the NSW government's proposal to restrict CSG activity goes ahead. Macquarie notes AGL expects to keep the licences and, if CSG is demonstrated to be safe, the projects could resume. Most brokers attach limited value to the gas portfolio so this uncertainty has not impacted the share price severely to date.

The interim dividend of 30c came through as most expected. Management highlighted a progressive policy which should produce steady growth but Macquarie notes, whilst in the investment phase in merchant and upstream gas, there was no consideration of a step change in the dividend. Credit Suisse found the dividend below its expected 31c but the cash flow profile should support upside in the second half and the broker forecasts a final dividend of 32c.





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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Feb 28 2013, 07:43 AM
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QUOTE
AGL is facing pressures on two fronts in its core gas business - producers are seeking to raise prices while heavy losses are likely after losing access to prime gas reserves in New South Wales. The energy utility disclosed on Wednesday it may write off up to $250 million on its exploration reserves in NSW following a decision by the state government to restrict exploration for coal seam gas, which could ''sterilise'' the extensive reserves it holds. The state government has banned coal seam gas drilling within two kilometres of urban areas.

AGL is in arbitration with its gas suppliers, seeking to prevent price rises before the expiry of long-term contracts in 2016 and 2017.


Read more: http://www.smh.com.au/business/agl-works-t...l#ixzz2M8d3GdPj
at least AGK has a cash flow business behind it - others not in sae position




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
alonso
post Posted: Sep 22 2012, 08:24 AM
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Jeik Savage of BBY has put out a chart projecting a move back above $15. If he's right I think I'll call it quits.



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"The optimist proclaims that we live in the best of all possible worlds. The pessimist fears this is true"

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." Adam Smith
 
alonso
post Posted: Sep 21 2012, 10:23 AM
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In Reply To: Nick1970's post @ Sep 20 2012, 08:30 PM

Thanks for that Nick. AGK has been one of my LT holds and boltholds but at the same time I look for steady incremental growth in such stocks and this ain't doing it.

The market is clearly in pause but I'm ever the optimist rolleyes.gif



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"The optimist proclaims that we live in the best of all possible worlds. The pessimist fears this is true"

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." Adam Smith
 
Nick1970
post Posted: Sep 20 2012, 08:30 PM
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In Reply To: alonso's post @ Sep 20 2012, 03:56 PM

Gave an exit on my system at around $15.20 and I have been out since. No new entry signal triggered as yet. I know that does not help much alonso.

I have got a feeling this market has topped out fort the moment...but that's all it is ..a feeling!



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Use a stop loss every time.
 
alonso
post Posted: Sep 20 2012, 03:56 PM
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I'm coming to the conclusion that this is going nowhere . . .and slowly at that. Anyone got thoughts on the outlook?



--------------------
"The optimist proclaims that we live in the best of all possible worlds. The pessimist fears this is true"

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." Adam Smith
 


alonso
post Posted: Jul 19 2012, 12:40 PM
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Sold my spp shares today. What a gift!! PLease sir, can I have some more?



--------------------
"The optimist proclaims that we live in the best of all possible worlds. The pessimist fears this is true"

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." Adam Smith
 
alonso
post Posted: Mar 23 2012, 02:48 PM
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In Reply To: nipper's post @ Mar 23 2012, 02:12 PM

So this new wind farm deal is likely to be good for my pocket? Hope so coz that's the only way I can cop having anything to do with renewable energy!



--------------------
"The optimist proclaims that we live in the best of all possible worlds. The pessimist fears this is true"

"What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom." Adam Smith
 
nipper
post Posted: Mar 23 2012, 02:12 PM
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QUOTE
- AGL has completed a transformational acquisition with Loy Yang A (LYA). Acquiring the minority interests for ~$448m, unlocks value within its own interest, and we estimate at least $40-50m of cost savings. We see the accretion for investors is likely to be in the order of at least $1 per share on a flat power price assumption. It is likely to be more if power prices recover as we move out
of the current La Nina event. The payback on the acquisition we estimate is ~7-8 years, thus a free carry for a residual 20-30 years thereafter. Such a short payback is unusual and reflects AGL benefiting from the government carbon compensation scheme in the first five years. From FY16 AGL will also benefit with Alcoa taking ~50% of the volume at the plant, and they themselves have carbon compensation.

- While the projects provides immediate value for shareholders it should also eliminate AGL's capital needs for the next five years, with the strong cashflow from LYA funding other projects in wind and solar power along with upstream development. AGL is in an ideal position to vertically integrate into the REC market. In the near term it is set to benefit from the implementation of the desalination plants, where AGL will sell wind energy at materially above the PPA prices of the plants. This will provide another kick to earnings beyond the benefit of carbon.

- The PE on AGL ex upstream is likely to be <10x, and post upstream in the order of 12-13x, the lowest for some time. AGL is successfully capturing customers in NSW, and with LYA in the portfolio can integrate the physical asset to generate an additional round of cost savings which we estimate at $40-50m.
Macquarie Marquee Ideas



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
hungry
post Posted: Mar 25 2011, 12:18 PM
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I think the leaky boat hole has been repaired

 
 


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