Steady and predictable

• Steady demand in Victoria state. As the second most populous state in Australia with an annual population growth rate of 1.7%, the establishment of new townships and customer connections for gas and electricity distribution can drive steady demand growth for SPN.

• Certainty of revenue and cash flow. Management reiterated that regulated revenue (90% of group revenue) has been locked in until 2011. All the latest resets were done by Apr 08 and there are no further regulatory resets until 2011.

• Focus on maintaining A rating. While management acknowledges that mediumterm interest rates could fall and it may miss the opportunity to refinance at lower rates, its focus is on managing its long-term average cost of debt. Its key objective is to continue to meet and exceed credit rating criteria to maintain its A debt rating. This is important as A ratings will make it easier for SPN to secure future financing

• Reiterate Outperform, maintain forecasts. We maintain our core net profit forecasts and DCF-derived target price of S$1.44 (WACC 10%). Distribution for 1H09 was within guidance and the stock will go ex-dividend on the SGX on 28 Nov 08 for an interim dividend of 5.927 A cts.

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