Credit Suisse downgrades AGL Energy
March 23, 2010
Despite raising its price target by 45c, Credit Suisse has downgraded its recommendation on AGL Energy (NEUTRAL, price target $16.90). The broker said the recommendation change reflected recent share price strength.
Since releasing its 1H10 result, AGK shares have rallied nearly 10%.
The Swiss broker said the higher price target reflected upside from retail margins and asset sales.
Specifically, Credit Suisse said around 24c of the price target increase was based on its view of continuing margin improvement in the retail business. The broker said AGK is over hurdles from the implementation of its customer business and is not set to extract value from the retail side.
In addition, Credit Suisse sees value for AGK from the sale of non-core assets such as the Moranbah coal seem gas stake and the Loy Yang power station. The broker values the Moranbah stake at $541 million net of tax, sunk costs and a 50% risk weighting.
Since releasing its 1H10 result, AGK shares have rallied nearly 10%.
The Swiss broker said the higher price target reflected upside from retail margins and asset sales.
Specifically, Credit Suisse said around 24c of the price target increase was based on its view of continuing margin improvement in the retail business. The broker said AGK is over hurdles from the implementation of its customer business and is not set to extract value from the retail side.
In addition, Credit Suisse sees value for AGK from the sale of non-core assets such as the Moranbah coal seem gas stake and the Loy Yang power station. The broker values the Moranbah stake at $541 million net of tax, sunk costs and a 50% risk weighting.
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