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What’s next for the APA Group share price with its CEO planning his exit?

Row of industrial high pressure gas gauge meters

The APA Group (ASX: APA) share price tumbled lower today after its long serving chief executive announced his retirement on the day that defensive stocks fell out of favour.

The APA share price fell 1.4% to $8.79 on Thursday as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index inched up 0.1% as investors regained some of their risk appetite due to rising optimism of an easing in the global trade war and a smooth Brexit.

This meant that stocks that performed well during times of uncertainty, like utilities and telecommunications, underperformed.

At least APA’s share price fall is nothing compared to the 17% flogging TPG Telecom Ltd’s (ASX: TPM) share price received today or the 3.3% plunge by Telstra Corporation Ltd’s (ASX: TLS) share price.

APA’s CEO Mick McCormack announced that he will be stepping down before the end of 2019 after holding the role for more than 13 years.

“Mick’s record speaks for itself in terms of his contribution to APA’s success and to the Australian energy industry since taking over as CEO and Managing Director in 2005,” said APA’s chair Michael Fraser.

“Over that time APA Securityholders have enjoyed compound annual total securityholder return of 14.9% making APA one of the ASX’s top performing entities.”

The gas pipeline group also announced that it was terminating its contract with a subsidiary of RCR Tomlinson Ltd (ASX: RCR) after RCR fell into receivership.

The RCR subsidiary was working on APA’s Darling Downs Solar Farm, which has an offtake agreement with Origin Energy Ltd (ASX: ORG).

The collapse of RCR shows how tricky it can be to invest in the construction and engineering sector despite the boom in infrastructure type projects.

The failure of RCR and the profit warning by Lendlease Group (ASX: LLC) have weighed on the sector with the LLC share price and Downer EDI Limited (ASX: DOW) share price coming under pressure recently.

APA said it will pay an interim dividend of 21.5 cents a share and the company reiterated its FY19 guidance last month following the failed takeover of the company by a Chinese consortium after the federal government blocked the deal.

I am underweight on utilities and other defensive sectors as I believe the bulls have at least one last puff left. The markets should perform well into early 2019 and that will leave defensive stocks behind.

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Motley Fool contributor Brendon Lau owns shares of Telstra Limited and TPG Telecom Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended TPG Telecom Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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