Is AGL really an ASX 200 ‘business with huge, huge upside for shareholders’?

No doubt market watchers will have been keeping an eye on the AGL Energy Limited (ASX: AGL) share price over the last few weeks as a battle between the company’s board and major shareholder Mike Cannon-Brookes’ Grok Ventures apparently heats up.

Market watchers will have noticed the S&P/ASX 200 Index (ASX: XJO) energy stock’s 22% tumble over the last six months. It has also dumped 73% over the last five years.

But AGL board hopeful John Pollaers reportedly believes the company could still prove a winner. That is, as long as the right hands have the wheel. And one broker is in agreeance.

So, is the AGL share price’s future as bright as the Sydney gas lamp the company first lit in 1841? Let’s take a look.

Does AGL offer ‘huge upside for shareholders’?

The AGL share price has had a tough run amid what could become an annual general meeting (AGM) battle.

Grok clapped back at the company’s decision to recommend shareholders vote just one of the four potential directors put forward by the major shareholder onto its board last week. The venture said:

It makes no sense to us – or a growing list of shareholders – that the board is rejecting highly-qualified, independent directors who are committed to helping them make AGL the leading green gentailer in the world.

Former Tesla Inc (NASDAQ: TSLA) director and Grok recommendation Mark Twidell’s election is supported by the AGL board. However, AGL chair Patricia McKenzie said adding Dr Kerry Schott, Christine Holman, or Pollaers to the board “would not add to [its] overall effectiveness”.

But Pollaers believes it’s “time to leave the corporate ego at the door”, telling The Australian the company is in need of “a classic turnaround”. He continued:

It’s a turnaround that actually has a lot going for if it gets the right leadership.

This is a business with huge, huge upside for shareholders and huge upside for the country.

There is the ability to really take a leadership position and transition industries into decarbonising and electrifying and it’s an opportunity that just requires the will of the board to shift towards solving the problem and then getting behind the execution.

When does a boardroom become a battleground?

AGL has flagged two areas in which it believes its board lacks skill and is aiming to fill those gaps.

When hunting for new board members, it’s focusing on finding people with ASX-listed board experience, including in mergers and acquisitions, and expertise in customers, digital retail, and emerging technologies.

Grok, meanwhile, has created its own skills matrix, finding the AGL board lacking in metrics such as customer markets, technological experience and understanding, and people and transformation skills. It said, “the current AGL board is encumbered by old thinking”, and continued:

The architects of the demerger, which was resoundingly rejected by shareholders, now believe they can transition the company. Based on their actions, it is not clear to us that the AGL board has accepted the demerger was a bad idea.

AGL’s underwhelming strategic review is case-in-point that the current board does not have the skillsets required to turn AGL around.

What do brokers expect from the AGL share price?

Credit Suisse is bullish on AGL’s transformation plan, as my Fool colleague James reports.

It said the company’s $20 billion plan to ditch coal will likely increase capital expenditures. However, it believes the company will retain strong free cash flow.

The broker has an $8.20 price target and an outperform rating on AGL shares.

Meanwhile, UBS analyst Tom Allen is cautious on how the company’s strategic plan will be funded. Allen said, as per the Sydney Morning Herald:

This plan is a significant step in the right direction from an ESG perspective.

However, investors and other stakeholders will likely need further detail before they are able to support the plan.

The post Is AGL really an ASX 200 ‘business with huge, huge upside for shareholders’? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. 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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