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No. of Recommendations: 0

I am a holder of AGL shares (ouch !) so the usual caution is required.
I would urge fools who are interested to look at the half-yearly financials available on www.agl.com.au/. It's quite impressive stuff.
Earnings per share for the half year are up 55% to 54cents and look set to beat 85cents for the year. Return on equity is now 11%. (No Rulemaker on this criterion). Net borrowing costs are covered 4.4 times by profit despite a debt-equity ratio up to 104% com-pared to 86.3% in June 1999.
What appeals is that borrowings have really risen to purchase investments like the Eastern Australian Pipeline ($120 million) and gas assets in NZ. About $1 billion of this will be floated off before June this year taking $700 million off borrowings, reducing the debt-equity to a more comfortable 60%, and driving earnings by at least another 20+% next year. ROE could nudge 15%.
It's hard to see why the market is treating AGL like Envestra or a utility, vulnerable to interest rate rises. On my calculations, it's on a forward PE of lessthan 8 and a PEG of 0.4 !. If dividends remain at 60% of earnings, the forward yield for next year is a juicy 7.65% partly franked. That's close to self-funding an equity loan.
I'd like to hear what other readers think, particularly those who disagree.

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