Daily ShareChat: TrustPower

By Jenny Ruth

Friday 12th November 2010

TrustPower's first-half result was disappointing, coming in below the same period last year and below his forecasts, says Andrew Harvey-Green, an analyst at Forsyth Barr.

The electricity company's earnings before interest, tax, depreciation, amortisation and financial instruments (EBITDAF) for the six months ended September were $147.7 million, down 4.6% on the year-earlier period and 9.1% below Harvey-Green's forecast.

“That said, the drivers of the underperformance are not a cause for long-term concern,” he says.

The company attributed the underperformance to Snowtown production and Australian electricity prices being lower, the mild 2010 winter which exacerbated TrustPower's drop in retail customer numbers and reduced demand, and because it couldn't take advantage of low spot prices during winter because it had been long generation heading into winter.

“This had the effect of increasing energy costs above the first-half 2010 and our forecasts,” Harvey-Green says.

TrustPower's guidance that it expects full-year EBITDAF will be in line with the $273.9 million earned last year implies second-half EBITAF will be up 5.2% on the second-half last year, he says.

“The expectation that the second half will be a good one highlights that the first half result, though a disappointment, does not impact long-term numbers significantly.” Harvey-Green has cut his valuation of the stock by four cents to $8.40.

Recommendation: Accumulate.

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