Analyst Note| Adrian Atkins |
We maintain our AUD 9.80 fair value estimate for narrow-moat APA Group and consider the stock fairly valued, offering a 5.5% partly franked yield with solid growth potential. We expect EBITDA to increase at an average annual rate of 4.4% over the next five years as development projects complete, driving similar growth in distributions to investors. The main negative is that APA's assets are not as long lived as other infrastructure firms. For example, earnings on the Wallumbilla Gladstone Pipeline--a third of group EBITDA--should fall to almost zero when the contract ends in 2036, even if the customer continues using it.