Skip to main content
Message Font: Serif | Sans-Serif
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 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.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.