Sharechat Logo

Daily ShareChat: Vector

By Jenny Ruth

Tuesday 8th March 2011

Text too small?
 Jenny Ruth

Vector's earnings before interest, tax, depreciation and amortisation (EBITDA) of $317.7 million were nearly $8 million ahead of consensus forecasts but $4 million behind his forecast, says Grant Swanepoel, an analsyt at Craigs Investment Partners.

"The earnings beat came mainly in the core electricity lines business and the gas wholesale division (ex-tolling) having halted its profit decline," Swanepoel says.

Electricity customer growth dropped below 1% with fewer multi-dwellings being built. "The electricity usage per customer has fallen consistently in the four half years to June 2010. This latest half saw a recovery in this metric as usage per customer increase by 1%."

The company is forecasting full-year net profit will be between $181 million and $203 million. "If the second -half achieves flat underlying earnings .. Vector would get to a net profit f about $199 million," he says. Swanepoel has cut his forecast from $203 million to $197 million, reflecting higher depreciation charges, interest rates and tax rate.

Swanepoel values Vector shares at $2.68, assuming long-term growth of 1.5% a year and 7.35% weighted average cost of capital. The key risks to his valuation "are regulatory uncertainty (positive or negative) and the depletion of domestic gas reserves (negative). The regulated gas and electricity distribution and gas transmission profits are subject more to government decisions than demand dynamics."


Recommendation: Hold.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Vector ekes out 2.3% gain in FY profit as technology unit bolsters earnings
Vector may beat guidance for FY 2013, suffer 2014 earnings drop
Vector cleared to buy Contact Energy's gas metering business for $63M
Vector to cut gas distribution prices by 18 percent
Vector 1H result up 10.8 percent in flat economy
ComCom takes issue with Vector on regulated rates of return
Vector credit rating may come under scrutiny
Vector profit steady, underpined by revenue growth
Long-running battle over power line prices coming to a head
Vector appoints Beddoe as chief risk officer