AU : AusNet Services - FY21 report card

The flat FY22 DPS guidance (implies 5.5% cash yield) and indications that DPS growth is facing revenue and capex headwinds may explain today’s c.7% share price decline. 12-month target price lifted 1 cps to $1.83/sh, due to forecast changes. The outlook for solid asset base growth is appealing, but the funding required for the capex driving the growth dilutes equity value creation over time. At current prices, the 12-month potential TSR is c.11% and 5-year IRR is c.6% pa. While today’s share price drop was more immediate than we expected, we assume the historical pattern of share price weakness in the months following the ex-dividend date will continue. This could see a better investment entry point.

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