APA +0.89%: delivered a an inline FY26 with underlying EBITDA up 8% and strong free cash flow supporting another increase in distributions.
Key results:
- Underlying EBITDA of A$2.18bn, up 8.3% and broadly in line with A$2.17bn expected.
- Revenue of A$3.00bn, ~5% below A$3.13bn consensus.
- Net profit (NPAT) of A$234m, up 81% and ahead of ~A$226m expected.
- Free cash flow of A$1.12bn, up 3.2% and well ahead of ~A$661m consensus.
- FY26 distributions of 58cps, in line with expectations.
- FY27 earnings (EBITDA) guidance of A$2.26–2.34bn, bracketing the A$2.28bn consensus.
- FY27 distribution guidance of 59cps, implying a yield of ~5.8% at current prices.
The growth story is becoming increasingly important with APA increasing its FY27-29 organic pipeline from ~A$3.0bn to ~A$3.5bn, including the Sybella Creek solar and battery project in Queensland, while the proposed Brigalow peaking plant is targeting operations from 2028. Cost discipline is also helping, with A$80m of savings delivered in FY26 and a A$100m annualised run-rate expected in FY27.
MM’s view: APA is doing what we’d expect from a defensive infrastructure business – growing earnings steadily, throwing off plenty of cash and increasing distributions, while building out a credible pipeline of future projects. We particularly like the evolution of the portfolio: gas infrastructure remains the cash-generating backbone, but batteries, renewables and flexible generation should provide incremental growth as Australia’s energy system becomes more complex. The catch is that this growth requires plenty of capital, with consensus capex stepping up materially over coming years, so execution and balance-sheet discipline matter. It’s not an exciting result, but for a stock yielding close to 6%, it doesn’t need to be.
MM remains long and bullish APA in the Active Income Portfolio
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