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Your thoughts on GR Engineering Ltd (GNG) and AGL Energy Ltd (AGL)

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Question asked 07/11/2025

Your thoughts on GR Engineering Ltd (GNG) and AGL Energy Ltd (AGL)

Dear Esteemed Team, I am becoming more fearful of a severe downturn in the economy. Despite my tendency toward greed, I am leaning more and more to defensive stocks and not worry about 'missing out' on massive profits in AI and other hi tech sectors. I notice you have AGL in your Income Portfolio . It has gone down a good bit the past few days which surprises me. I would see this as a good defensive stock with a good fully franked dividend. I notice they have only just re-introduced the 100% franking. Is this likely to continue and is it likely to do well as times get tougher. GNG looks like a nice small/medium cap that you covered a few months ago and spoke well of it. Is GNG likely to thrive in hard times? Often mining services companies are the first things cut when the going gets tough. Are they likely to maintain their high fully franked dividend? Thanx once again for your always wise counsel . Octogenarian

Answer

Hi Octogenarian

Two very different stocks here, an mining services firm and an electricity and gas utility.

AGL Energy Ltd (AGL) – AGL is still trading at the same level as it was in late September, while the ASX200 is trading ~0.4% higher, nothing too telling there. We still hold the utility as the company is undergoing a major transition toward net zero emissions by 2050. It has struggled in recent days as the hotter-than-expected CPI and the RBA’s hawkish stance weighed on rate-sensitive stocks. Adding to the pressure, the Australian government proposed a plan requiring energy retailers to provide households with free electricity during the middle of the day, when solar generation peaks—surely an invitation for everyone to turn on all their appliances!

AGL’s dividend is forecast to climb from 48c fully franked in 2025 to 57c by 2035, a slow and steady appreciation – but the longest the forecast, the more that can go wrong! Moving forward they intend dividends to remain fully franked, but this like everything in life is not guaranteed. It depends on their earnings and tax situation.

GR Engineering Ltd (GNG) – GNG builds and supports the processing plants that miners need to turn ore into saleable minerals, without being a mining company itself, or in other words mining services. This $660mn company has had some nice tailwinds in recent years, and these guys run a great operation, with a good pile of cash to serve as a buffer when times are more challenging – very important for this type of business.

The stock continues to look great, with revenue up 45% YoY and forecast to yield 5.5% Fully Franked over the next 12-months

At this stage of the cycle, we still feel the mining services sector is solid and after correcting back under $4 the risk/reward towards GNG is good. It is one we have on the radar.

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GR Engineering Services Ltd (GNG)

LAST UPDATED 06/11/2025 13:43

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