South Australia Power Network (49% owned by Spark Infrastructure) has asked for no material change in total revenue across 2020-25, even though it is targeting higher expenditure than the regulator assumes.
Morgans notes expenditure is the main issue, as it drives growth in the regulated asset base and thus the return on, and return of, capital allowance.
Hence, the network will need to outperform on costs. Morgans builds a -3% shortfall into revenue modelling and maintains a Reduce rating. Target is raised to $2.00 from $1.96. SAPN is 28% of the broker’s target price.
Sector: Utilities.
Target price is $2.00.Current Price is $2.21. Difference: ($0.21) – (brackets indicate current price is over target). If SKI meets the Morgans target it will return approximately -10% (excluding dividends, fees and charges – negative figures indicate an expected loss).
