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Origin Energy Ltd – FY19 Profits Result Up Strongly And Slightly Ahead Of Expectations

Tim Montague-Jones

Tim Montague-Jones has over 20 year investment management experience working in the financial markets. Previous experience includes a ten year stint at Morningstar as a Senior Equity Analyst/Portfolio Manager, founding the Morningstar Growth Portfolio and a founding member of their Investment Committee. Tim was also a Senior Equity Analyst for Macquarie Group and a member of the winning team to obtain the 2016 LONSEC Fund Manager of the Year award.

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.

Origin Energy Ltd - FY Results

What is the FY19 result?

Today (Thursday 22 August 2019), Origin released its FY19 results. The main points are as follows:

  • Underlying EBITDA of A$3,232 million, up 16 per cent.
  • Underlying profit of A$1,028.9 million, up 42 per cent.
  • Underlying EPS of 58.4 cents, up 42 per cent.
  • Final dividend of 15.0 cents per share (fully franked). This makes the total dividend for FY19 of 25.0 cents per share. This compares with no dividend in FY18.

The key features of the results are as follows:

  • The main driver of higher earnings in FY19 was an increased underlying EBITDA for the Integrated Gas business of 51 per cent to $1,892 million. This outcome is mainly due to an increase of 40 per cent in the average realised liquefied natural gas export price and lowers costs.
  • Underlying EBITDA in Energy Markets was $1,574 million, a decline of 5 per cent from FY18. Electricity EBITDA was down 10 per cent due to price relief measures and competition resulting is in higher discounting. Gas EBITDA was up 10 per cent with volumes and margins increasing.

 

What is the outlook?

Origin provides guidance in respect of its two business units rather than guidance for the total company.

  • Energy Markets underlying EBITDA guidance for FY20 is $1,350 to $1,450 million compared with $1,574 million in FY19. The gross profit of the natural gas portfolio is expected to be relatively stable, while it is estimated that there will be a reduction in electricity gross profit reflecting the impacts of government default market offers ($100 million), lower green scheme prices flowing through to business customer tariffs and lower customer usage.
  • In respect of the Integrated Gas business, LNG production and capital expenditure in FY20 is expected to similar to FY19 levels.

 

What is the market’s reaction?

Today (Thursday 22 August) Origin is trading at around A$7.45, up around 3.5 per cent. This suggests that the FY19 result was slightly better than expectations. Origin trades at a P/E ratio of around the mid-teens and an annual dividend yield of around2.5 per cent (fully franked).

 


 

Disclaimer:

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).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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