APA Group: Scarcity premium priced prematurely. Reinstate at Underperform.

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APA Group: Scarcity premium priced prematurely. Reinstate at Underperform.

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APA Group

Scarcity premium priced prematurely.

Reinstate at Underperform.

Reinstating Coverage: UNDERPERFORM | PO: 8.70 AUD | Price: 10.12 AUD

Reinstate at Underperform. PO $8.70. 27 May 2026

We reinstate coverage of APA Group (APA) with an Underperform rating and a PO of Equity

$8.70. While APA’s contracted revenues and CPI linkage provide some support to

earnings as inflation concerns re-emerge, we see (1) deferred southern gas shortfalls Cameron Needham >> Research Analyst

and (2) declining near-term maximum seasonal GPG daily demand as likely to weigh on Merrill Lynch (Australia)

sentiment and earnings expectations. At 11.7x EV/EBITDA, over one standard deviation +61cameron.needham@bofa.com2 9226 5034

above three-year historic average 11.2x, we see valuation as stretched and think the Lara Tufegdzic >>

market may be prematurely pricing in a capacity-scarcity premium unlikely to materialise Research Analyst

Merrill Lynch (Australia)

near-term. APA’s 5.7% DY is a 0.8% spread to the Australian 10y bond yield - near five- lara.tufegdzic@bofa.com

year lows. Risks: supportive regulatory outcomes, contracting beats expectations. Gary Tsang >>

Research Analyst

Peak GPG demand easing. Tailwinds long dated. Merrillgary.tsang@bofa.comLynch (Hong Kong)

While APA does not sell molecules, the value of its east coast network does depend on

customer need for firm transport capacity at peak demand. AEMO’s 2026 GSOO

highlights peak GPG demand falling through to 2028; summer maximum demand is

Stock Dataexpected to decline by 43% from 2026 to 2028, and winter maximum demand falls 20%

over the same period. We think this likely weakens APA’s near‑term recontracting Price 10.12 AUD

position.