Co. Reaches Key Catalyst in Project Commissioning

Source: Daniel Laing 07/01/2025

LGI Ltd.’s (LGI:ASX) Eastern Creek biogas conversion should contribute to its bottom line an estimated annual EBITDA of AU$33.5 million, starting in fiscal year 2026, noted a Bell Potter report.

LGI Ltd. (LGI:ASX), which recovers biogas from landfills and converts it into renewable energy, had its target price raised 4% by Bell Potter, reported Analyst Daniel Laing in a June 24 research note. This resulted from the financial advisory firm updating certain forecasts for LGI right before the energy company’s fiscal year 2025 (FY25) is to end.

“We have updated each valuation used in the determination of our price target for the earnings changes as well as market movements and time creep,” Laing explained.

22% Return Implied

Bell Potter’s new price target on LGI is AU$3.65 per share, up from AU$3.50, and reflects earnings changes, market movements and time creep. The company, at the time of Laing’s report, was trading at about AU$3.02 per share, the analyst noted. As such, the return to target is 22%.

LGI remains a Buy. The company’s market cap is AU$268.2 million (AU$268.2M). Its 52-week range is AU$2.36–3.20 per share.

Comprehensive Solution

Along with renewable energy generation, LGI’s vertically integrated solution also includes greenhouse gas abatement and site infrastructure and management.

“The company is addressing an inherent environmental issue for waste disposal sites,” Laing wrote.

The company’s project portfolio contains 32 projects throughout Queensland, New South Wales and the Australian Capital Territory. Steven of these sites are generating renewable energy, 19 sites are providing carbon abatement via biogas flaring and 15 are generating Australian carbon credit units (ACCUs) as registered Emissions Reduction Fund projects.

As for LGI’s customers, 85% is Australian local government councils. Others are state governments and private waste management enterprises.

Notable Achievements

Laing presented two of LGI’s major recent developments and reviewed and revised Bell Potter’s related forecasts.

One, LGI commissioned the project at Bingo Industries’ Eastern Creek Recycling Ecology Park in New South Wales, “a key catalyst” for the energy company, noted Laing. It completed the project, involving the installation of four 1-megawatt (1 MW) generators on site, on time and on budget. Bingo takes the overall capacity of LGI’s portfolio to 23 MW. The project is expected to contribute annual EBITDA of AU$3–3.5M starting in FY26.

Two, LGI secured contracts for four more sites, Lithgow Council and Midcoast Council in New South Wales, along with Southern Downs Regional Council and Western Downs Council in Queensland. Given these wins, Bell Potter raised its forecasts for ACCU volumes in FY26 and FY27 both by 4%.

Laing reported that forward electricity costs have increased for Queensland and New South Wales, each locale accounting for about half of LGI’s project portfolio. The ASX Energy Data Center’s estimated cost of forward electricity in Queensland is about AU$119 per megawatt hour (MWh) and in New South Wales, about AU$101 per MWh. Accordingly, Bell Potter raised its electricity price forecasts for FY26 and FY27, for its LGI model, both by 10% to align with ASX Energy’s projections.

Bell Potter revised its commodity price and volume forecasts also to be in line with ASX Energy data and LGI’s recent operational accomplishments. This raised revenue estimates for FY26 and FY27 to 2% and 3%, respectively. It also lifted earnings per share for FY26 by 3% and for FY27, by 6%.

Laing reported that Bell Potter did not change its FY25 forecasts for LGI. They remain as such: revenue of AU$37.9M, EBITDA of AU$17.2M, net profits after tax of AU$6.4M and diluted EPS of 7.2c.

Investment Thesis

Laing noted two main reasons why LGI makes a compelling investment. One reason is the company’s pipeline that could triple MW capacity throughout its existing project portfolio to 47 MW.

“The high conviction pipeline has provided significantly improved visibility over the growth of the LGI business and allows for much greater confidence in our long-term forecasts,” the analyst wrote.

A second reason is the drivers of LGI’s topline revenue growth. They are biogas volumes and pricing of electricity, large-scale generation certificates and ACCUs. Laing explained that the combination of direct air capture plus storage and batteries on LGI sites allows the company to charge prices that are 77% better than the average Australian Energy Market Operator pricing. Consequently, revenue growth is higher.

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Disclosures for Bell Potter, LGI Ltd., June 24, 2025

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