AGL – Macquarie rates the stock as Underperform

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AGL had hinted at a desire to move into the telco space at Macquarie’s recent conference but rather than muck around, it has put in a bid for Vocus Group ((VOC)) below the bid that private equity recently withdrew. While the broker suggests the move would be accretive given AGL’s balance sheet capacity, it also believes the risk for AGL investors is significant.

Investors will need to be convinced of the benefits of this capital-heavy move into the teclo space and buybacks will be a distant memory as AGL undertakes development, the broker warns. Underperform retained, target falls to $19.06 from $19.99.

Sector: Utilities.

Target price is $19.06.Current Price is $19.40. Difference: ($0.34) – (brackets indicate current price is over target). If AGL meets the Macquarie target it will return approximately -2% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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