APA - APA Group

[Dona Ferentes]

risk on

APA raising $750m at $8.50 a share to buy Alinta’s Pilbara assets​

Gas pipelines owner APA Group has clinched a deal to buy Alinta’s remote power assets in WA’s Pilbara regions

 

[finicky]

I've been looking around for big cap stock that pays franked dividends for my Aunt to buy with her self managed super. She needs the income with franking credits and something 'safe'. She used to use Telstra (TLS) to this end. Obviously she came to me, humbly searching for wisdom. So I looked at this for the first time.
Looks like a lot have picked in for similar reasons? I could dismiss it straight away because of the partially franked returns. But then I struggled to value it at half the current price, if that. Maybe this is to do with the market selling bond like securities (such as REITs as an example) due to rising yields and preferring the real thing, i.e Bonds.
Then the chart looks like a double top in imminent danger of breaking $8 and confirming a break of the trough inbetween the two peaks. My first target for that would be $6. I know nothing of their Alinta acquisition and future prospects obviously.

Not Held

ALL DATA MONTHLY

 

[divs4ever]

My first target for that would be $6. I know nothing of their Alinta acquisition and future prospects obviously.

interesting , normally not on my watch-list for the reasons you mentioned

have plenty of REITs despite the dangers coming , and TCL doesn't crunch attractively for me

very interesting

cheers

 

[divs4ever]

BTW not a head and shoulders ??

pretty raggedty on the left ...but

 

[Smurf1976]

One of my picks for the 2024 trading competition.

Reasons for choosing it being the share price is near the bottom of a trading range that's gone sideways since early 2015, so almost 9 years now.

Plus the fundamental, albeit speculative with the timing, that governments are going to have to put serious effort into energy infrastructure before too much longer and in that regard APA is reasonably well placed in regard to four potential opportunities:

1. Moving gas from distant source (Qld, NT, WA) to the south-eastern states where supply shortages are developing.

2. Moving gas between other states and Victoria, noting the seeming reluctance to ship LNG into Vic whilst there's much greater enthusiasm for that concept in NSW and SA.

3. Gas-fired electricity generation noting APA has an essentially shovel ready project at Dandenong (Melbourne).

4. As a potential investor into electricity transmission, most significantly and obviously between Victoria and Tasmania noting that APA has acquired the existing link.

Those are all somewhat speculative and heavily dependent on political decisions but it's plausible APA could benefit from them.

 

[Value Collector]

One of my picks for the 2024 trading competition.

Reasons for choosing it being the share price is near the bottom of a trading range that's gone sideways since early 2015, so almost 9 years now.

Plus the fundamental, albeit speculative with the timing, that governments are going to have to put serious effort into energy infrastructure before too much longer and in that regard APA is reasonably well placed in regard to four potential opportunities:

1. Moving gas from distant source (Qld, NT, WA) to the south-eastern states where supply shortages are developing.

2. Moving gas between other states and Victoria, noting the seeming reluctance to ship LNG into Vic whilst there's much greater enthusiasm for that concept in NSW and SA.

3. Gas-fired electricity generation noting APA has an essentially shovel ready project at Dandenong (Melbourne).

4. As a potential investor into electricity transmission, most significantly and obviously between Victoria and Tasmania noting that APA has acquired the existing link.

Those are all somewhat speculative and heavily dependent on political decisions but it's plausible APA could benefit from them.

APA also on top of bass link already owns the electricity link between QLD-NSW and VIC-SA

 

[basilio]

I have chosen APA as my fourth pick for the CY 2024. Frankly I thought Smurfs analysis was a as compelling as anything I have seen.

Thanks.

 

[basilio]

Just rechecked this thread. I noticed that VC had done some indepth analysis on APA and believes it offers good long term value.
Offers much food for thought as another investment. Thanks

 

[Value Collector]

Just rechecked this thread. I noticed that VC had done some indepth analysis on APA and believes it offers good long term value.
Offers much food for thought as another investment. Thanks

Hahaha, I just had a look back at the conversation I had with Luutzu, Man he is a good bloke but damn he is so cynical, Hahaha.

Surprise, Surprise 8 years later APA is still paying a growing dividend and even some franking credits now. I wonder if he still thinks it’s a Ponzi.

I still hold APA and have done since 2000, it’s been a great dividend payer over the years. Just like the property trusts it’s seen a bit of a revalue downwards of its share price lately due to the rising interests rates causing investors dividend yield requirements rising, but this is just part of the cycle.

 

[basilio]

Not much to say about APA. SP has been trending down in January. (The Bas jinx I believe..)

They posted an Investor Presentation Day last November which highlighted their Pilbara energy purchase and plans for future development.

APA Investor Day Presentation (PDF 8,839.4 KB)

 

[InsvestoBoy]

Because APA has high earnings visibility, for a long time the pricing followed bond prices closely, it's a very common relationship in the Utilities sector.

after COVID the relationship was disrupted as bond yields rose dramatically while APA got a bid on (I assume) equity beta and energy exposure

After APA caught down to bonds and more recently the relationship seems to be re-asserting itself as uncertainty about APA earning visibility reduces

Some valid questions:

- is the future going to be like the past and APA retain its spot as biggest bond proxy on the ASX? If so what's your view on long duration?
- is the future going to be less like the past and more like the inflationary shock period of 2021/2022?

As APA is one of the S&P ASX 50 stocks, if you have a CommSec account you can access the Morningstar Premium report on them for free which has some good analysis IMHO.

 

[Value Collector]

Because APA has high earnings visibility, for a long time the pricing followed bond prices closely, it's a very common relationship in the Utilities sector.

View attachment 169414

after COVID the relationship was disrupted as bond yields rose dramatically while APA got a bid on (I assume) equity beta and energy exposure

View attachment 169415


After APA caught down to bonds and more recently the relationship seems to be re-asserting itself as uncertainty about APA earning visibility reduces

View attachment 169416

Some valid questions:

- is the future going to be like the past and APA retain its spot as biggest bond proxy on the ASX? If so what's your view on long duration?
- is the future going to be less like the past and more like the inflationary shock period of 2021/2022?

As APA is one of the S&P ASX 50 stocks, if you have a CommSec account you can access the Morningstar Premium report on them for free which has some good analysis IMHO.

I basically consider APA to be an inflation hedged bond in some respects, where part of the bonds coupon is reinvested each year to make the bond face value grow.

There biggest head wind APA has had recently has been interest rates causing investors to demand higher dividend yields/bond interest rates. But this affect should only be a short term thing, as we move through the cycle I think APAs share price will recover back to its highs.

 

[Sean K]

One of my picks for the 2024 trading competition.

Reasons for choosing it being the share price is near the bottom of a trading range that's gone sideways since early 2015, so almost 9 years now.

Plus the fundamental, albeit speculative with the timing, that governments are going to have to put serious effort into energy infrastructure before too much longer and in that regard APA is reasonably well placed in regard to four potential opportunities:

1. Moving gas from distant source (Qld, NT, WA) to the south-eastern states where supply shortages are developing.

2. Moving gas between other states and Victoria, noting the seeming reluctance to ship LNG into Vic whilst there's much greater enthusiasm for that concept in NSW and SA.

3. Gas-fired electricity generation noting APA has an essentially shovel ready project at Dandenong (Melbourne).

4. As a potential investor into electricity transmission, most significantly and obviously between Victoria and Tasmania noting that APA has acquired the existing link.

Those are all somewhat speculative and heavily dependent on political decisions but it's plausible APA could benefit from them.

This has been smashed the past 2 years. Around 8 bucks might be a bottom. Maybe.

I wonder if SMR's are a chance down the track.

Or, Twigger might buy it.

 

[Value Collector]

This has been smashed the past 2 years. Around 8 bucks might be a bottom. Maybe.

I wonder if SMR's are a chance down the track.

Or, Twigger might buy it.

View attachment 169758

Back in 2008, after being steadily smashed during the GFC, I was able to buy a bunch of APA at under $3 paying a 10% dividend, it was a great time. Now might be a similar opportunity.

APA is one of those great steady dividend stocks I love holding in my portfolio, they pay a steady growing dividend as they steadily grow their business. But every so often interest rates and other external influences cause the market to shun them for a while, it’s generally a great time to pick some up if you have the patience to wait it out collecting a decent divvy.

I have owned APA since I was 18, I am 42 now , @Sean K My first lump sum I got paid for completing Kapooka went in APA stock, I still remember making the phone call to commsec from a pay phone the first Monday lunch break after arriving at IET’s

 

[Value Hunter]

I get that APA has very stable revenues and earnings but it has around $11 billion in long term debt compared to shareholders equity of less than $2 billion and operating cash flow of $1.2 billion it seems like the debt is on the high side.

Also dividends are only partially franked.

But apart from those two negatives it overall seems to be a good business and is trading at a reasonable price.

 

[divs4ever]

I get that APA has very stable revenues and earnings but it has around $11 billion in long term debt compared to shareholders equity of less than $2 billion and operating cash flow of $1.2 billion it seems like the debt is on the high side.

Also dividends are only partially franked.

But apart from those two negatives it overall seems to be a good business and is trading at a reasonable price.

yes that debt ( and it's acquisitive nature , rather than reducing that debt ) kept me at arm's length

 

[Value Collector]

I get that APA has very stable revenues and earnings but it has around $11 billion in long term debt compared to shareholders equity of less than $2 billion and operating cash flow of $1.2 billion it seems like the debt is on the high side.

Also dividends are only partially franked.

But apart from those two negatives it overall seems to be a good business and is trading at a reasonable price.

Shareholders equity only appears low because of accelerated write off of assets, and franking credits are low because they don’t pay much tax because of the accelerated write offs.

Also, it’s pretty normal for companies in regulated utilities to hold a lot of debt, its mostly very long term debt, some of it is bonds that don’t mature until 2060, which at that point its basically as stable as shareholders equity.

regulators actually prefer companies with regulated income to finance their assets with debt, because it’s cheaper for the consumer that way.

 

[Value Collector]

yes that debt ( and it's acquisitive nature , rather than reducing that debt ) kept me at arm's length

I think you are misunderstanding that style of business, if you have regulated income, that rises along with inflation and interest rates, it’s silly to not use long term debt.

Also, if you tried to pay down debt to much the regulators would be upset, because their pricing formulas means they would have to pay to more. Because the cost of capital is built into the price they allow you to charge your customers, and if you use to much of your own equity It’s more expensive for the consumer.

 

[Smurf1976]

This has been smashed the past 2 years. Around 8 bucks might be a bottom. Maybe.

As one of my picks for the 2024 competition, thus far it's a "yellow light".

Hasn't started going up as I'd hoped, but it also hasn't set a new low. So it's broadly neutral at the moment.

If I were choosing today then using the same maths criteria it wouldn't have come up but as per my previous post, that's me messing about with an unproven approach in the context of the time frame so don't take that too seriously. The business fundamentals haven't changed however.

 

[divs4ever]

I think you are misunderstanding that style of business, if you have regulated income, that rises along with inflation and interest rates, it’s silly to not use long term debt.

Also, if you tried to pay down debt to much the regulators would be upset, because their pricing formulas means they would have to pay to more. Because the cost of capital is built into the price they allow you to charge your customers, and if you use to much of your own equity It’s more expensive for the consumer.

OK but regulators and regulations change

now i can't imagine an Australia without gas .. but that is the agenda being pushed by some ( influential talking heads )

even our finance regulators got a big shake-up not so long back