Morgans continues to doubt the sustainability of the distribution, guided at $0.16 per security in 2018, over the medium term. In the short term, the yield of around 7% remains attractive for income-oriented investors.
The investor briefing suggests the Transgrid transmission network is critical in enabling utility-scale renewable generation in the NSW market, while the South Australian and Victorian distribution networks will be important in managing the distributed energy resources.
Morgans notes SAPN and VPN remain the centrepiece of the business. A reduction in earnings and operating cash flow is expected for both these businesses when the next regulatory control periods commence in 2020/21. Capital expenditure should drive growth in the regulated asset base, ultimately anchoring long-term revenue. The company continues to review M&A opportunities.
Morgans maintains a Hold rating and reduces the target to $2.32 from $2.34.
Target price is $2.32.Current Price is $2.33. Difference: ($0.01) – (brackets indicate current price is over target). If SKI meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges – negative figures indicate an expected loss).