Core Viewpoint - The construction of natural gas infrastructure in China is accelerating, with significant progress in the development of the "five vertical and five horizontal" pipeline network, enhancing the country's natural gas transmission capacity [1] Group 1: Infrastructure Development - The construction of key pipeline networks, including trunk and branch pipelines, gas storage, and peak-shaving facilities, is being comprehensively promoted [1] - The completion of the Turpan to Zhongwei section of the West-to-East Gas Pipeline Phase IV marks a significant milestone in the infrastructure development [1] - The main welding of the Hulin-Changchun natural gas pipeline has been completed, indicating progress in the construction of major gas transmission lines [1] Group 2: Capacity Enhancement - The first section of the Sichuan-to-East Gas Transmission Phase II has been put into operation, contributing to the overall increase in natural gas supply [1] - China's natural gas primary pipeline transmission capacity has surpassed 400 billion cubic meters, reflecting a leap in pipeline gas transmission capabilities [1]

Core Insights - The S&P 500's dividend yield is declining, nearing 1.2%, which is close to its record low last seen in 2000, resulting in lower dividend income for new investments [1] - Real estate and energy sectors currently offer higher average dividend yields of 3.4%, making them attractive for investors seeking better payouts [2] Energy Sector - Many energy stocks provide higher dividend yields, with Kinder Morgan (KMI) offering above 4% backed by a strong financial profile, including take-or-pay contracts securing 69% of cash flows [6] - Kinder Morgan maintains a conservative payout ratio of 44% of its cash flow from operations in 2025, allowing for substantial excess free cash flow for expansion and consistent dividend increases [6] - Brookfield Renewable (BEPC) yields around 4.5%, supported by stable cash flow from long-term fixed-rate power purchase agreements, with 70% of revenue linked to inflation [7][8] - Brookfield aims to increase its dividend by 5% to 9% annually, having grown its payout at a 6% compound annual rate since 2001 [8] Real Estate Sector - The REIT sector is a strong source of dividend income, with NNN REIT yielding over 5%, focusing on freestanding retail properties secured by triple net leases [10] - NNN REIT has a history of increasing its dividend for 35 consecutive years, supported by a conservative payout strategy [11] - Mid-America Apartment Communities (MAA) has a dividend yield of around 4%, driven by strong rental demand in the Sun Belt region, and has increased its dividend for 15 straight years [12] Investment Opportunities - Despite the overall decline in average dividend yields, energy stocks and REITs present lucrative opportunities for investors seeking higher income streams without incurring additional risk [13]

Summary of the Conference Call Transcript Industry Overview - The report focuses on the **energy sector** in the **Asia Pacific**, specifically on **gas pipeline, coal haulage, refining, and convenience retail companies** referred to as "energy movers" [1][3][6]. - The **Future of Energy** is identified as one of four key themes for **Morgan Stanley Research** in 2025, highlighting the underperformance of Australian midstream and downstream energy stocks compared to the **ASX200** [3][6]. Company Analysis - **Preferred Companies**: - **Ampol Ltd (ALD)**: Upgraded to **Overweight (OW)** with a projected total shareholder return (TSR) of **33%** [1][22]. - **APA Group (APA)**: Rated **Equal-Weight (EW)** with a TSR estimate of **10.5%** [1][22]. - **Downgraded Companies**: - **Aurizon Holdings (AZJ)**: Downgraded to **Underweight (UW)** with a TSR estimate of **7%** [1][22]. - **Viva Energy Group Ltd (VEA)**: Rated **Equal-Weight (EW)** with a TSR estimate of **35%** [1][22]. Performance Metrics - **Stock Performance**: - APA has shown a total shareholder return of **13.5%** year-to-date (CYTD) in 2025, while ALD has a return of **-10.3%** [5][20]. - AZJ has underperformed with a **1.6%** return CYTD, and VEA has a **-30.4%** return [5][20]. - **Financial Metrics**: - APA's **debt/EBITDA** ratio is **7.0x**, indicating a highly leveraged balance sheet [44]. - ALD has the least leverage with a **debt/EBITDA** of **3.3x** [44]. Investment Framework - The investment framework integrates various metrics including **macro, operating, balance sheet, return, energy transition, and valuation metrics** to rank the energy mover stocks [9][10]. - The report emphasizes the importance of **energy transition** and its impact on stock valuations, with a focus on **Climate Transition Action Plans (CTAPs)** and investment in new energy projects [11][13][32]. Key Risks and Opportunities - **Regulatory Risks**: The upcoming **Australian Federal Election** and reviews of the **Gas Code of Conduct** present uncertainties but could also provide opportunities for the fossil fuel sector [9][43]. - **Tobacco Excise Impact**: ALD and VEA face headwinds from tobacco-related sales due to high excise charges and increased black market activity [43]. Conclusion - The report concludes with a recommendation to favor ALD and APA while being cautious with AZJ and VEA due to their respective challenges and market conditions [22][28]. - The analysis suggests that the energy sector's performance will be influenced by regulatory changes, market dynamics, and the ongoing energy transition [16][43].