How long have you held the stock?

We have held the stock for around two years.

What do you like about it?

Ausnet (AST) is the largest owner of essential energy infrastructure in Victoria with over $12 billion invested in gas/electricity distribution and electricity transmission.

This is essential infrastructure, such as poles and wires, which power homes and businesses and the pipelines which provide natural gas for your stove and heater. Essential infrastructure such as this cannot be replicated easily, due to economies of scale, and therefore the impact of any potential competition is limited whilst providing a recurring, defensive and regulated earnings stream.

Ausnet is an attractive and consistent income producing stock, thanks to its ability to grow its regulated asset base over time, which allows the company to grow its earnings and distributions over time.

How is it better than its competitors?

Ausnet owns essential infrastructure and so it has no real direct competitors. Because of this, the majority of its returns are tightly regulated, but this also helps produce a very predictable earnings stream.

Outside of regulation, Ausnet also has the opportunity to compete on unregulated projects, where the scale of its existing asset base and high level of experience provides a significant advantage over smaller competitors.

What do you like about its management?

Ausnet’s management is the most conservative in the regulated utility sector – it has the lowest gearing in the sector at 68% and because of this the company has been given an A- credit rating by the ratings agencies.

Management have also done a great job growing the regulated asset base over time, which has grown around 8% annually over the past five years. This is expected to continue growing in the future and thanks to this the company will be able to increase distributions to shareholders in the future.

What is your target price?

All things being equal, we would expect the share price to reach $1.60 within the next year or two.

Is it a liquid stock?

Ausnet is a liquid stock as it is a top 100 stock.

Source: Yahoo!7 Finance, 28 May 2015

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