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    Thoughts on APA

    Keen to hear your thoughts on APA in the context of reviewing your portfolios for exposure to rate sensitive stocks. Also hoping to get your thoughts on whether the current pressure on the share price is purely related to rates and the UniSuper selling or whether you think the market is repricing based on concerns with fundamentals (concerns about debt, growth strategy and sustainability of the dividend) Thanks Chris

    Answer

    Hi Chris,

    We haven’t called APA very well through 2024 and its certainly in the centre of a few headwinds as we head into Christmas:

    • Following Trumps victory interest rates look likely to say higher for longer.
    • Markets are now concerned around APA’s broader funding and commercial challenges moving forward. We think this is overblown but we’re clearly wrong at the moment.
    • UniSuper recently sold a $500 million block of APA at $7.23, and they still hold ~4% of the stock suggesting more may come.

    Buyers have been filled above $7 implying there will be selling into any short term strength from current levels.

    • Honestly, we’re at a loss as to why it’s being sold down so much i.e. we are currently down 22% on our position, having been fairly patient before buying back in at $9.82, having sold it previously above $12.
    • We continue to believe its good value ~$6.75, now trading on a yield of 8.4%, which is 412bps over the US 10 year yield vs historical average ~280bps, but its going to take time to regain the markets confidence.
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    APA Group (APA)
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