AGL upgrades FY10 guidance to $320-$330 m Previous was $290 m to $320 m. UBS has upgraded FY10 3% to $325 m and FY11 and FY12 by 1%. We have increased electricity merchant and retail lines to move from our previous estimate of $314 m.
REC legislation remains a key catalyst Revised REC legislation, which should ensure a secure medium term future for the wind industry in Australia is currently before the upper house. Little legislation is passing the upper house right now, nevertheless there are press indications that the bill may have enough support to pass.
Surplus of gas, and lack of carbon signal reduce generation prospects Despite floods in the Cooper Basin there is a surplus of gas in Eastern Australia and that surplus is being converted to electricity, in turn helping to push down the electricity price. Electricity demand is also only flat on PCP. Electricity retailing does well, but AGL?s merchant gas business may still stuggle given high TOP contracts and prices.
Price taraget maintained at $16.35 Our price target is SOTP based and values core earnings at 9X ebitda with an estimate for other assets. Core earnings exclude wind farm development profits and Loy Yang equity accounted profits.
AGK Price at posting:
$13.95 Sentiment: Buy Disclosure: Held
