ASX has some fundamental stocks, which can be bracketed into invest and forget category. The Best Stocks to Invest in are not only resilient, but are futuristic too, making them a compelling investment opportunity.
AGL Energy Limited (ASX: AGL)
AGL Energy Limited (ASX: AGL), in a recent development, has announced a binding agreement to acquire 100% of the shares and units in Firm Power and Terrain Solar for approximately $250 million. This acquisition aligns with AGL's strategic commitment to expand and accelerate its development pipeline, which currently stands at 6.2 GW. The acquisition will strengthen AGL's role in the energy transition by focusing on projects with the greatest long-term value. The expanded pipeline will feature several mid-sized Battery Energy Storage Systems (BESS), ranging from 200 to 500 MW with storage times of two to eight hours. This move positions AGL to take advantage of market opportunities and leading in clean energy.
In FY24, AGL Energy Limited demonstrated a robust financial performance with underlying EBITDA rising 63% to $2,216 million and underlying profit after tax surging 189% to $812 million. The company also achieved a substantial statutory profit after tax of $711 million. Despite a decrease in total generation volumes by 8% to 34.1 TWh, largely due to the closure of Liddell Power Station's final units, AGL improved its fleet efficiency with an Equivalent Availability Factor (EAF) of 85.8%, up 9 percentage points from FY23. AGL delivered higher consumer electricity gross margins and benefited from the Torrens Island Battery's solid earnings contribution in its first nine months. The company declared a final unfranked dividend of 35 cents per share, bringing the total dividend for FY24 to 61 cents per share, reflecting a 50% payout ratio. AGL also significantly expanded its development pipeline from 3.2 GW to 6.2 GW and improved cash flow performance, with net cash from operating activities increasing by $947 million to $1,859 million. The company displayed its strong liquidity and financial stability, with $1,701 million in cash and undrawn committed debt facilities at the end of the year.
Over the past five years, the company has shown strong financial recovery and growth, making it an appealing investment opportunity. Revenue increased to AUD 13,583 million in FY 2024, up from AUD 12,160 million in FY 2020, reflecting consistent operational strength. Gross profit margins improved significantly to 23.9% in FY 2024, up from 15.4% in FY 2022, demonstrating effective cost management and operational efficiency. The company’s EBITDA and operating profit also saw notable gains, with EBITDA reaching AUD 2,218 million and operating profit climbing to AUD 1,471 million in FY 2024. Cash reserves surged to AUD 932 million, bolstering financial flexibility, while debt was reduced to AUD 2,728 million, improving leverage. Return metrics such as ROE and ROA have rebounded, showing effective capital use and profitability. The dividend yield increased to 4.5%, reflecting a strong commitment to shareholder returns. Overall, with enhanced profitability, solid cash flow, and improved balance sheet metrics, the company is well-positioned for continued growth and stability, making it an attractive choice for investors.
AGL Energy is a stock for Long Term Holding as it is making notable strides toward its long-term strategic objectives for FY27. The company's dedicated initiatives in digitalization and enhancing customer experiences are positively influencing its Net Promoter Score (NPS) and contributing to the growth of its digital-only customer segment. Additionally, AGL's commitment to increasing its renewable energy generation capacity remains substantial. The expansion of its decentralized asset base under management underscores its proactive strategy to address the burgeoning market demand for home electrification and various residential solutions for electric vehicles (EVs). Furthermore, the company's digital growth via the Kaluza platform is anticipated to facilitate smoother transactions and billing processes, while also enhancing customer service and automating retail operations. Collectively, these elements, particularly the Kaluza platform, are expected to bolster the company's Retail Transformation Strategy, which aims to generate pre-tax savings ranging from $70 to $90 million by FY29 through significant efficiencies achieved in the retail energy sector.
AGL possesses a diverse array of operational energy projects and maintains a substantial pipeline of future initiatives, encompassing both conventional and an increasing share of renewable energy ventures. These elements underscore a robust and stable growth framework for the organization, characterized by scope for consistent revenue increases and the potential for advancements through enhanced customer loyalty and an improved market standing
Source: Company’s Report
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