Future of Energy_ The Future of Moving Energy

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].