AGL Energy is Australia’s second largest retailer of electricity and gas.
AGL is the oldest company listed on the ASX, founded in 1837. It services over 3.3m retail electricity and gas customers in the eastern and southern Australian states representing a 27% market share.
Profit (EBIT) is evenly split between energy retailing and energy generation and procurement activities.
Generation capacity comprises a portfolio of peaking, intermediate and base load plants with a combined capacity of 3,614 MW.
Although first half 2012 profits were 51% below prior period comparison it was the derivative revaluations which produced the poor result. If we adjust for these revaluations the performance net profit was up 3% and in line with expectations.
The recent acquisition of Loy Yang base load power station taking their share from 33% to 100% caused concerns over credit ratings but is expected to be earnings accretive form 2013 financial year.
The company has a forecast dividend of $0.62 per share which is expected to be 66 & franked.
I noted that the last two dividends had 100% franking. The gross yield for this company is 6.4% at 100% franking.
Over the past couple of months the price has moved up from $13.70 to $14.94 our price target remains at $17.50.
The recent price movement in price has pulled our recommendation back from a Buy to an Accumulate.
For more information on AGL Energy please contact us on 07 4771 4577.