Tough regulation will keep Spark's returns under pressure, but distributions are sustainable.
The outlook for Spark is fairly benign for the next few years as regulated tariff increases, cost-out initiatives and investment to expand and upgrade networks support earnings. Nonetheless, we believe the stock is marginally overvalued at the current price of AUD 2.57 based on a longer term view, with ongoing risks from regulation and likely rising interest rates. Our fair value estimate remains AUD 2.30 per security. While Spark is a solid business, we think it lacks an economic moat as regula...
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