SP Ausnet (SPN) is an energy infrastructure company, operating mainly in Victoria. It also operates a gas distribution network in WA. The group has three energy networks, electricity transmission, electricity and gas distribution.

All networks are 100%-owned and located in Victoria, operating as regulated natural monopolies given the high barriers of entry.

• The Electricity Transmission Network carries electricity from power stations to electricity distributors around Victoria
• The Electricity Distribution Network carries electricity from the transmission grid to customers throughout eastern Victoria
• The Gas Distribution Network carries gas from the transmission grid to customers mainly located in western Victoria

1H13 results

SPN’s 1H13 results were a significant improvement on 1H12, mainly driven by an increase in regulated tariffs.

Net profit climbed 15.6% on-year to $169.0 million, which came on the back of a 6.5% increase in revenue.  EBITDA over the half grew an impressive 6.5% to $525 million.

SPN’s balance sheet also improved in the half, with net gearing ratio dropping from 60% to 56% and interest cover increasing form 2.6x to 2.7x. On the funding front, the group has $775 million debt maturing in March 2013.

While the company does have the ability to pay this from current cash (approx. $427 million) and $625 million in undrawn committed bank debt facilities, we wouldn’t be surprised given the current low interest rate environment if SPN refinanced the loan at a significantly lower rate.

Distributions

SGN’s monopoly-like business gives it a stable and predictable income stream in which to pay distributions. This saw the company pay a 4.1 cent distribution in 1H13, a 2.5% increase on the prior corresponding half.

The groups also reaffirmed its full-year guidance of 8.2 cents a security.

Based on a closing share price of $1.045, this represents an attractive yield of approximately 7.5%, or a gross yield of 8.5% if franking stays consistent at 33.3%. In the 1H13, 89% of SPN’s revenue was regulated and essentially inflation protected.

SPN’s yield makes it extremely attractive to income-seeking investors, especially given the recent RBA rate cut and the fact that interest rates are at their lowest since the GFC.

Outlook

SPN is forecasting capital expenditure for 2013 to be around 24% higher than 2012. This investment should help the company continue to grow its earnings and distribution. SPN has not only forecasted for FY13 distribution growth of 2.5%, but also for FY14 growth of 2%.

SPN will continue to deliver stable and predictable revenue growth over the coming years and we think investors chasing yield will continue to drive the share price higher.

This article was distributed to our members on December 14th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only SP Ausnet but all our current trading ideas. Simply click here and starting trading today.

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Santos Limited explores for and produces natural gas, crude oil, condensate, naphtha and liquid petroleum gas.  The Company conducts major onshore and offshore petroleum exploration activities at oil and gas fields in Australia (Cooper/Eromanga Basins), the United States (Gulf of Mexico), Indonesia and Papua New Guinea. The Company also transports crude oil by pipeline. The company is Australian based and is member of S&P/ASX 200.

Santos reported first-quarter revenue of $754 million a 50% jump compared to the prior corresponding period.

CEO David Know said that “Higher production, combined with strong oil and gas prices, has delivered a solid first quarterly result, setting a strong foundation for 2012”.

The company maintained its annual production guidance of between 51 million and 55 million barrels of oil.

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BlueScope Steel Ltd (ASX:BSL) is a major steel company in Australia and New Zealand, supplying flat steel products to the building, construction, manufacturing, automotive and packaging industries.

ASX 200 listed stock BlueScope has today launched a $600 million share issue.

The new shares will be offered at $0.40, which represents a 34% discount to the most recent close.

The money will be used to repay existing debt.

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Incitec Pivot Limited (ASX:IPL) produces and distributes fertilisers and explosives. IPL has operations throughout the United States, Canada, Mexico and Australia.

ASX 200 stock Incitec Pivot has delivered a strong annual profit, slightly beating market forecast.

Incitec recorded a 13% lift in net profit, which it contributes to the second half rise in fertiliser prices and demand for explosives.

The company declared an 8.2 cent dividend, compared to 6 cents the same time last year.

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News Corporation (ASX:NWS) is a diversified media conglomerate with interests in all geographic locations around the world, and in all facets of the media. The principle activities of the company include printing and publishing, books and magazines, television broadcasting and production including both free to air and pay television, and film production and distributions.

Today, ASX 200 listed News Corp reported 1Q12 revenue of US$7.96 billion, up  7% from  a year ago. However net profit for the quarter came in at US$738 million, down from US$775 in the previous quarter.

The fall in earnings was partially due to the $68 million, or 38%, decrease of operating income in the publishing segment. This reflected the impact from the closure of The News of World in the U.K.

The Cable Network Programming, Filmed Entertainment and Direct Broadcast Satellite Television segments all recorded double digit revenue increases compared to the prior corresponding quarter.

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Harvey Norman (ASX:HVN) is an integrated franchisor, retailer and property entity, operating a slew of retail stores under three leading brand names: Harvey Norman, Domayne and Joyce Mayne.

HVN has been one of the shares to sell in recent times, with the company buckling under the weight of the strong Aussie dollar and declining consumer sentiment.

HVN’s FY11 net profit climbed 9% to $252.3 million.  A final dividend of 6 cents was declared.

Sales were down 1.7% on-year, with HVN suffering from the strong AUD and weak consumer sentiment.

HVN was cautious about the FY12 outlook, citing global volatility, higher utility costs, subdued equity markets and a possible pickup in domestic unemployment.

However the group was anticipating an increase sales leading up to the Rugby World Cup and London Olympics.

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Fortescue Metals Group (FMG) is an iron ore miner, with operations located in the lucrative Pilbara iron ore province in Western Australia.

The company is the third biggest iron ore miner in Australia behind BHP Billiton (ASX:BHP) and Rio Tinto (ASX:RIO) – two of the market’s leading blue chip stocks.

On 1 June, FMG CEO Andrew Forrest announced plans to step down from his role on July 18.

Forrest, who founded FMG in 2003, will assume the new role of company chairman at the board’s next meeting on August 18.

Chief Operating Officer Nev Power will become the new FMG CEO upon Forrest’s exit.

Separately FMG said it is targeting an annual iron-ore production rate of 155 million tonnes by mid-2013.  FMG was previously aiming to achieve the milestone by 2014.

The group said key contracts are in place and the strong price of iron-ore has provided it with the means to grow capital spending.

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Nufarm (NUF) produces agricultural fertilisers and chemicals used for crop protection internationally.

The company is also actively involved in the marketing and sale of branded, off-patent crop protection and seeds treatment products.

NUF was one of the shares to sell during the first half of 2010 amid poor results and earnings downgrades.

On 29 March, NUF reported a 1H11 operating net profit of $22.7 million.  This compares to an operating loss of $4.2 million loss a year earlier.

Including one-off costs and write-downs, Nufarm’s net loss came in at $40 million.  No interim dividend was declared.

Excluding glyphosate sales, group revenue rose 15% on-year to $694 million.  This was associated with a healthier gross margin as NUF sought to optimise its sales mix.

NUF was confident that positive climatic conditions in Australia and an improved operating environment will deliver a full year result significantly better than the prior year.

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