APA Group Stapled Securities

By Kenneth Robson on August 12, 2014 • ( 0 )

Stapled securities are created when two or more securities are contractually bound together so that they cannot be bought or sold separately.

The two parts are usually a share in one company and a unit in a trust related to that company. For example, a property trust may have its units stapled to the shares of the company that manages the trust’s properties. The trust is the legal owner of the property assets. The related company manages the fund and development opportunities, and charges the trust a fee.

Disclaimer

I came across this security screening through charts listed in the ASX 300 index (XKO) screening for investment opportunities. I’m impressed with the chart appearance. This is information of a general nature, and is not to be regarded as investment advice.

Profile

APA Group (APA) is Australia’s largest natural gas infrastructure business, owning and/or operating in excess of $12 billion of energy assets.

Its gas transmission pipelines span every state and territory in mainland Australia, delivering approximately half of the nation’s gas usage. APA has direct management and operational control over its assets and investments.

APA also has ownership interests in, and operates, the Envestra and the Allgas gas distribution networks, which together have approximately 25,000 kilometres of gas mains and approximately 1.2 million gas consumer connections. APA also owns other energy infrastructure assets such as gas storage facilities and a wind farm.

In addition to Envestra and GDI (EII), which owns the Allgas Distribution Network, APA also has equity interests in a number of energy infrastructure assets, including SEA Gas Pipeline, Energy Infrastructure Investments, EII2 and the Ethane Pipeline Income Fund. APA is listed on ASX and is included in the S&P ASX 50 Index.

The chart that impressed

This is a weekly chart featuring Multiple Moving Averages over the past 5 years.

Up and up

Observations

There has been a spectacular uptrend from about $3 to a high of $7.50.
The momentum for increase is still strong with diverging short and medium term plots of the averages, still pointing steely upwards.
The RSI indicator however has moved into the over-bought zone suggesting that the time might be right for a pull-back.
It should be noted that when the short and medium moving average plots separate markedly in this way, there is a tendency for the share-price to ease back towards the mean price.

Conclusion

This stock has been an excellent investment choice for superannuation funds and retirees, but it may prove to be over-priced at the present level. A correction to a medium level average price of about $6.50 would restore its attractiveness for long-term investment.

The stapled nature of the shares may pose some risk perhaps, and those readers wishing to invest should seek professional investment advice.