SPN invests in regulated utility infrastructure assets.
Singapore Power retains 51% and manages the assets, businesses and finances of SPN through wholly owned subsidiary SP Management.
Approximately 89% of SPN´s revenues are regulated. Distributions are covered by operating cash flow, part in the form of capital return.
The level of growth in distributions is dependent on the outcome of regulatory resets.
The majority of investor returns should come from distributions making SPN an income stock.
Their first half 2012 result was in line to expectations and we expect to see the second half also meet projections.
Revenue increased 5.7% and dividends were paid in line with expectations. The forecast dividend is 8.1% for the 2012 year.
We have a fair value on this company of $1.15; it is currently trading at $0.96 making this a good long-term purchase for those investors who are looking for income and long-term growth.
The next regulatory review occurs in 2012 and the changes will take affect at the start of 2013. It is expected that the Gas tariffs will increase at the next regulatory review.
The regulated assets continue to perform well with revenue up 6.1% and a 1.9% increase in customer connections for electricity and a 3% increase in connections for gas.
This is a good low risk long-term stock for those investors chasing income and longer term growth.
For more information on SP AusNet (SPN) please contact us on 07 4771 4577.