SP AusNet - Attractive Buy!

1. Offers high and stable dividend yield of 9.8% at current price of $1.40.
2. SP Ausnet is favoured for its stable and sustainable growth in distribution per stapled security due to its predictable cash flow from the regulated revenue. It’s a relatively “safe haven” stock to consider for its highly assured distribution payout. Notably, it guided for 11.55 Aust cents for FY08F and 11.8 Aust cents for FY09F.
3. Favourable final decision at Gas Access Arrangement Review (GARR) & Transmission Regulatory Reset (TRR) secures and locks in around 90% of the revenue for gas and electricity transmission for the next 5 years till Dec 2012 and Mar 2014 respectively. Hence, in the near term, there is only the gas distribution scheduled for reset in Dec 2010. We can expect minimal surprises from now till 2010.
4. It also refinanced A$1.55 billion debt at margins of between 40 and 50 basis points, representing favourable terms in the current market, no major need for refinancing till 2011.
5. SPN operates in the regulated privatized monopoly of electricity and gas transmission and distribution sectors where its revenue is highly regulated. This eradicates any downside risks, albeit at the expense of upside surprises.