APA Group
(ASX: APA), a leading ASX energy infrastructure business announced its FY20 report today. The APA share price will be on watch by infrastructure investors.
APA’s main asset is its large gas pipeline which stretches across large parts of the country. It also has investments in other energy assets like gas storage and renewable energy generation.
APA FY20 result
APA reported that its total revenue rose by 4.8% to $2.13 billion. FY20 was the first full year of contributions from new growth assets in Queensland and Western Australia.
In September 2019 a new asset was commissioned, the Badgingarra Solar Farm in Western Australia.
APA’s EBITDA (click here to learn what EBITDA means) went up 5.1% to $1.65 billion thanks to the revenue growth.
Operating cashflow grew by 8.3% to $1.1 billion and net profit after tax (NPAT) rose by 10.1% to $317.1 million. I think that’s solid growth under the current uncertain circumstances.
Distribution
APA Group had already announced that the final distribution was 27 cents, bringing the full year FY20 distribution to 50 cents – an increase of 6.4%.
During the year the company issued over $1 billion of long term medium term bonds into the European market. That money was used to enhance liquidity and pre-fund future debt maturities as well as assisting to reduce APA’s average cost of debt.
Outlook
APA said that FY21 EBITDA is expected to be between $1.625 billion to $1.665 billion, this suggests that operating profit will essentially be flat. Only around $10 million of EBITDA is expected to be contributed from the Orbost Gas Processing Plant in FY21 under the existing plan. Net interest costs are expected to fall in the range of $490 million to $500 million.
The distribution is also expected to be substantially in line with FY20’s distributions, though it wouldn’t surprise me to see a slight increase – APA has grown its distribution every year for over a decade.
The business still sees substantial investment opportunities in both the US and Australia.
APA Group Managing Director Rob Wheals said: “Importantly, the Australian energy market operator is forecasting a 2023 winter gas supply shortfall in the south eastern market, which we consider is likely to require ongoing expansion of the East Coast Grid to supply the additional transportation capacity from northern markets to the south.”
I think APA is a promising idea with a current yield of 4.6% at the pre-open APA share price. If you want defensive income then APA could be a reliable long term choice. The Rask Media team will write about other ASX dividend shares ideas, so you should bookmark the page and come back regularly.
