AGL has surged over 25% so far in 2024, and considering the current macroeconomic background, we have no interest in fading this move. The company delivered a strong result in August, with FY25 guidance slightly ahead of expectations. Both electricity and gas portfolio margins remain strong, supported by AGL’s investment in operational flexibility and the curtailing of its low-margin exposure. We continue to regard AGL as a high-yielding defensive play with solid and improving tailwinds from the energy transition.
We can see robust FCF (free cash flow) as the company transitions towards a broad suite of battery (& solar) development options. While most are in early stage planning without development approvals (DA), four battery projects, with an ~$1.3bn est. capex the most progressed and may slip into AGL’s development plans over the next 2-3yrs.
- AGL is forecast to increase its yield from 5.5% in Fy26 to 7.8% in Fy29, which should reward patient investors.
- We are initially targeting a test of $13 by AGL, 8-10% higher – MM holds a 4% weighting to AGL in both our Active Growth Portfolio and Active Income Portfolio.
MM is long and bullish AGL
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