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Investors Positive on Origin Energy Despite Soft Report

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Origin Energy Ltd (ASX: ORG) is an integrated energy company focussed on oil and gas exploration and production, power generation and energy retailing in Australia. In fact, Origin controls about one third of the Australian energy retailing market. Its market capitalisation is A$12.9 billion.

What are the key features of Origin’s HY20 results?

Underlying profit for HY20 is A$528 (down 10% compared with the corresponding period), while free cash flow for HY20 is A$680 million (up 22% compared with the corresponding period).

Underlying earnings per share for HY20 is 30.0 cents per share, down from 33.7 cents per share from the corresponding period. Interim dividend for HY20 is 15 cents per share, up from 10 cents per share compared with the corresponding period.

What are the key drivers of this result?

The main drivers contributing to a 15% fall in earnings are retail price re-regulation, one-off unplanned generation outages at Mortlake and Eraring and lower electricity volumes. Additionally, this half year gas sales were lower compared with the last period, along with less demand for energy amongst consumers, which added to the fall in profits.

What is the outlook for Origin?

FY20 guidance for energy markets underlying Earnings before interest, taxes, depreciation, and amortization (EBITDA) is in the range of A$1.4 billion – A$1.5 billion. Production at Australian Pacific LNG is expected to be at the upper end of the previously guidance of 690 – 710 PJ.

What is the market reaction?

The market reaction to Origin’s HY20 report is positive. Origin’s share price us up 2% and is currently trading at A$7.95. Origin is currently trading at a forward P/E ratio in the low-teens and an annual dividend yield of around 3.5% (fully franked).



This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

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