SP Ausnet Dividend Stock Tracker Update and Analysis

Dividend Yield updated to reflect latest income distribution and a summary of the fire-related lawsuit coming their way

SP Ausnet have been very attractive recently on my Dividend Stock Tracker particularly because of the listed dividend yield.

Share price have been under pressure due to the lawsuits coming their way:

PERTH, AUSTRALIA – Australian infrastructure firm SP Ausnet said on Monday it was facing a fire-related class action suit in Victoria state, and not its parent company Singapore Power.

SP Ausnet said it is currently awaiting findings of an investigation for the deadly bushfire in 2009 and would vigorously defend the claims.

SP Ausnet, 51 per cent owned by Singapore Power, said in a statement its electricity distribution operating company, SPI Electricity Pty Ltd, has been named as defendant in current proceedings in the Supreme Court of Victoria state.

Law firm Maurice Blackburn said on Saturday that it was representing more than 600 victims of the deadly 2009 firestorm and was seeking hundreds of millions of dollars in damages.

The action claims that SP Ausnet’s failure to maintain a 43-year-old powerline or to install a protective device called a vibration damper caused the line to collapse, which sparked the firestorm.

On February 7, 2009, deadly bushfires tore through much of Victoria state, killing more than 170 people. One of the most serious was northeast of Melbourne, around the Kinglake community.

SP Ausnet, which runs a power transmission network in the southeastern state of Victoria, said it would vigorously defend the claims, but added that it was inappropriate to discuss the matter with court proceedings still in progress.

The firm, which has previously said that it has liability insurance that provides cover specifically for bushfires, would also wait for findings of an investigation report due at the end of July.

Previous Stock Information:

Many have asked me how I derived this high dividend distribution and my answer to that is its last workyear’s dividend distribution. I can only publish whatever information that I can get, so please understand that.

From time to time, I will carry out a fundamental analysis on the datas in the dividend stock tracker. Particularly in situations like this where the yield is exceptionally high.

Revised Stock Information:

Here is the updated dividend distribution. Income comes up to AUD 0.08 or SGD 0.093.

Summary

Since last work year, SP Ausnet have raised new units to improve its liquidity.

There is a red flag in its operation as a utilities where long term debt over asset is greater than 50%.

This is usually a danger flag for me, but I take them as a case by case basis, since in my analysis of Starhub, debt to asset ratio is way way way worse than this yet my take of Starhub is that it is still much safer.

What is not reflected is capital expenditure is AUD 581 mil

NOPAT is AUD 420 mil

Therefore a free cashflow of –161 mil which is not a very good figure

They have been funding the dividends therefore through raised new units/borrowings to the tune of AUD 399 mil

Investing in utilities business is not high return (as evidenced by the low ROIC of 6%) and in the case of the lawsuit coming their way just go to show that what you deemed as a stable dividend yielding asset is susceptible to one time big cash outlows.

Does a 10% yield compensates me for the risk? A potential investor will need to study in detail what is the potential outcome of the lawsuits and how it impacts the business and its cashflow.

This might affect future dividend payouts as similar to the case of BP, dividends might be reduce to compensate for the lawsuit.

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