Similar to other analysts, he points out that the deal is accretive, with reported/underlying EPS increasing 14%/23% respectively and ROE rising to 22.5%/24.3% from 19.7 %. He attributes the difference between reported and underlying figures to mark-to-market fair value losses from energy derivatives.
Foo thinks that Alinta is a “desirable” asset but requires “experienced hands” to run it due to earnings volatility, due to the use of energy derivatives. He thinks that SCI CEO’s experience in the Australian market is an asset.
The analyst notes growth opportunities in Australia’s east coast as well as Alinta’s upcoming 10.4GW of renewables.
Although Foo decreases FY2025 estimates EPS by 4%, he is increasing estimated FY2026 and FY2027 earnings by 7% and 15%. Based on sum-of-the-parts valuation, Macquarie values SCI at $7.04.
