APA - APA Group

[sptrawler]

APA in talks to acquire Bass link, if this deal goes through it should be a nice addition to their portfolio of assets.

Just had a quick look at APA on the asx website, the P.E seems extremely high, so a quick question that may save me some time, if their price to earnings is already at 2,932, how will they fund a takeover?

 

[divs4ever]

Fundamentals​

• Market Capitalisation$10.69B
• P/E Ratio27.53
• EPS $0.340
• PE Growth-
• Debt to Equity Ratio 457.2%
• Price to Book 4.89
• 5 Year Beta 0.56
• Margin Lending LVR 70%

according to Commsec

please note this data might not be up-to-date ( at least not as current as you might wish )

but the numbers haven't looked attractive to me , yet

 

[sptrawler]

Fundamentals​

• Market Capitalisation$10.69B
• P/E Ratio27.53
• EPS $0.340
• PE Growth-
• Debt to Equity Ratio 457.2%
• Price to Book 4.89
• 5 Year Beta 0.56
• Margin Lending LVR 70%

according to Commsec

please note this data might not be up-to-date ( at least not as current as you might wish )

but the numbers haven't looked attractive to me , yet

My appologies, I'm on a phone and the print is small and my eyesight isn't great, thanks for the post. Still looks all a bit toppy to me.

 

[divs4ever]

the data hasn't inspired me to buy

but no apology needed , sometimes those trading platforms have some outrageous figures on some stock fundamentals ( and they can be slow to update them as well )

surely some D/E ratios on other stocks can't be correct

Debt/Equity Ratio 768.60 for SYD

Debt/Equity Ratio 1604.10 for QAN

as two eye-watering examples

 

[divs4ever]

even if the APA debt ratio is only 457% , your question on how they will raise funding remains valid ( imo )

i sure as heck won't be buying APA debt at less than 9% p.a. interest , and might resist even at 11% p.a.

 

[Value Collector]

Just had a quick look at APA on the asx website, the P.E seems extremely high, so a quick question that may save me some time, if their price to earnings is already at 2,932, how will they fund a takeover?

Their reported Earnings are always artificially low, due to the large accelerated depreciation charges they are allowed to write off against earnings.

Rather than use “earnings” to calculate PE, use free cash flow.

the number they report as “free cashflow”, is closer to their true earnings, it’s their operating profit minus the stay in business cap ex.

last year free cashflow per share was $0.76 and the dividend was $0.51, their policy is to pay out 60%-70% of free cashflow as dividend, the rest can be used for growth investment.

 

[Value Collector]

even if the APA debt ratio is only 457% , your question on how they will raise funding remains valid ( imo )

i sure as heck won't be buying APA debt at less than 9% p.a. interest , and might resist even at 11% p.a.

They have $1.9 Billion of available liquidity on their balance sheet already, and given the high amounts of regulated income don’t have a problem in issuing long dated bonds, they even have a 60 year bond on their books.

Not to mention that regulated utilities have their interest costs built into the prices they are allowed to charge, so if their average interest rate did rise, so would their prices.

 

[Value Collector]

When using free cash in the PE instead of earnings, it comes out as a PE of 12, and based on the guidance of next dividend the yield is 5.8%.

That’s not to shabby for a portfolio of critical, nationally important regulated, and long term contracted energy assets.

 

[sptrawler]

They have $1.9 Billion of available liquidity on their balance sheet already, and given the high amounts of regulated income don’t have a problem in issuing long dated bonds, they even have a 60 year bond on their books.

Not to mention that regulated utilities have their interest costs built into the prices they are allowed to charge, so if their average interest rate did rise, so would their prices.

I actually think the idea of buying into Basslink, is a good idea, it is forward thinking, I was just wondering how it would affect their balance sheet.
The gas pipelines will be used a lot during the transition from coal, then IMO there will be a huge capital cost to change the infrastructure to cope with H2, but that isn't insurmountable. So I'm very interested, just trying to get a handle on it.

 

[Value Collector]

I actually think the idea of buying into Basslink, is a good idea, it is forward thinking, I was just wondering how it would affect their balance sheet.
The gas pipelines will be used a lot during the transition from coal, then IMO there will be a huge capital cost to change the infrastructure to cope with H2, but that isn't insurmountable. So I'm very interested, just trying to get a handle on it.

Yep, They already own the Qld-Nsw interconnection and the SA-ViC, so it’s a business they understand.

As I mentioned above the have $1.9 Billion of available liquidity looking for a home, and Bass link is only a few $100 Millions.

modelling shows that natural gas demand will continue to grow as coal fired electricity is phased out, and we need to fill in the gaps between solar and wind.

 

[So_Cynical]

APA bidding for Ausnet Services, another 10 billion to add to the MC if successful, APA kind of looks cheap.

 

[Smurf1976]

I'll simply say that if you own the gas network, and buy the electricity network, well then it would be rather hard to fail.

It's equivalent to owning every method of transport or owning every form of media. Regardless of which has the most success, as a company you win.

Even better when your revenue and profit is effectively guaranteed.

 

[Value Collector]

I'll simply say that if you own the gas network, and buy the electricity network, well then it would be rather hard to fail.

It's equivalent to owning every method of transport or owning every form of media. Regardless of which has the most success, as a company you win.

Even better when your revenue and profit is effectively guaranteed.

Pretty much the only way to fail would be to pay to much.

 

[Value Collector]

APA have bought $99 Million worth of debt securities in Basslink.

Prior to this APA had made a take over offer that fell through, my thoughts are that this debt purchase is Apa’s way of securing a seat at the table during the bankruptcy proceedings, with the intent of taking the company over.

 

[Value Collector]

If you watch this video, at the 9 min mark they explain what I believe APA is doing, eg planning on converting the debt into equity during the bankruptcy.

 

[divs4ever]

Estimated interim distribution

For the six months ending 31 December 2021 APA Group (ASX:APA) today announced an estimated FY22 interim distribution of 25.0 cents per security for the six months ending 31 December 2021.
This represents a 4.2% increase over the FY21 interim distribution of 24.0 cents per security. Total expected distributions for FY22 continues to be 53.0 cents per security, inclusive of the distribution of 25.0 cents per security for the six months ending 31 December 2021.
The actual amount of the interim distribution and its tax deferred status will be confirmed following finalisation of the half year results, which are due for release on 23 February 2022. APA will confirm allocable franking credits when finalising the final distribution with the release of the half year results on 23 February 2022.
The key dates for the interim distribution are: Securities trade ex-distribution 30 December 2021 Record Date 31 December 2021 Payment Date 17 March 2022 Distribution Reinvestment Plan (DRP) The DRP remains suspended for this interim distribution.
All APA securityholders will receive their distributions in cash. Payment of Interim Distribution Distribution payments to securityholders with a registered address in Australia or New Zealand will be paid by direct credit to their nominated bank account.
Securityholders are encouraged to check their payment details are up to date and, if a change is required, to promptly advise APA’s registry, Link Market Services, by phoning the registry on 1800 992 312 or on-line at www.linkmarketservices.com.au.

DYOR

i do not hold this share

( and last i heard APA is not longer the front-runner taking over AST , , so it is less likely i will get into APA that way )

 

[Dona Ferentes]

APA deciding not to go the risky path / pursue the risky pipeline :

The current MD is cutting links and leave in December as the Board has decided not to buy assets in the US market, instead "preferring to focus on returns to investors" .

It's an infrastructure business. Chairman Michael Fraser said of the US:

"Whilst there are clearly attractive aspects to that market, it also involves a number of risks and ongoing investment challenges."

 

[Value Collector]

APA deciding not to go the risky path / pursue the risky pipeline :

The current MD is cutting links and leave in December as the Board has decided not to buy assets in the US market, instead "preferring to focus on returns to investors" .

It's an infrastructure business. Chairman Michael Fraser said of the US:

As an Apa shareholder, I feel a bit more comfortable with them sticking to the Australian Market, I wouldn’t have been against them going into the USA market, but I am kinda glad they have chosen not to.

 

[sptrawler]

APA deciding not to go the risky path / pursue the risky pipeline :

The current MD is cutting links and leave in December as the Board has decided not to buy assets in the US market, instead "preferring to focus on returns to investors" .

It's an infrastructure business. Chairman Michael Fraser said of the US:

It certainly would be interesting to find out what turned them off.

 

[Value Collector]

It certainly would be interesting to find out what turned them off.

I think it was just a lack of suitable deals, they were looking for 3 years, but they did say several times that it was a competitive environment.

After 3 years of maintaining a state side office, and accommodating staff in serviced apartments they probably grew tired of the expenses and lack of deal flow.