Ann: ORG Half Year Results for the period ended 31 December 2015, page-71

February 2016:
"By a long way, I find this to be the most undervalued large cap stock in the Australian market."

May 2017:
Fast forward one year and two months, and I decided to reviewing this holding of mine today.
To my surprise, my findings are that it is almost as much a buy today at $7.50 as it was when the price was around $4.20.

As I started my assessment this morning, I did so with some expectation that I might sell my shares on 1 July, at the start of the 2018 tax year.

Instead, I am now going to be buying more shares in coming weeks.

Funny thing sometimes, this investing lark."


Fast forward yet another year, and - despite the more than doubling of the share price over the past 2 years - the stock still doesn't look unattractively valued by the market.

It is quite amazing what ORG management have achieved over the past two-and-a-bit years, having reduced Net Debt - without recourse to shareholders for funds - from over $9.5bn @ 30 June 2016 (corresponding to a scary ~5.5x NIBD-to-EBITDA at the time) to around $6.5bn today (NIBD-to-EBITDA of less than 3.0x).

Given they are tracking well ahead of my expectations (as well as their own, I'll wager), I think that a resumption of dividends is on the cards, with greater than 50% chance of one being declared with the 2018 full-year result.

With EV/EBITDA (incl. APLNG proportional) between 8.0x and 8.5x currently, and falling by around 0.8x to 1.0x each year for the next few years - as APLNG ramps up, and as the balance sheet continues to de-gear - it suggests to me that the stock price will continue to rise.

It doesn't take too much by way of hairy-chested energy pricing assumptions to envisage an ORG share price of $12.00 at some stage in the not-too-distant future.


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