Origin Energy has had its share price targets slashed by analysts in the wake of news of its $2.5 billion equity raising, although several analysts have reiterated positive calls on the stock while RBC Capital Markets has raised its call to outperform. JPMorgan more than halved its target for Origin shares, to $6.40 from $13, after cutting earnings estimates as a result of lower oil price assumptions. It kept its recommendation at overweight. The planned issue of 636 million new shares at $4 apiece means earnings per share estimates have been cut more severely. UBS reduced its 12-month price target for Origin shares to $6.57 from $9.67, while retaining a buy call. UBS analyst David Leitch told clients that he expected Origin to trade at a 23 per cent discount to its peers amid a lack of confidence in the company after several written-off investments in power generation and the change of tack on the need for a capital raising. UBC analyst Paul Johnston also slashed his price target for Origin, to $6.50 from $10, but pointed to "significant upside from these depressed levels" given guidance for earnings given by the company on Wednesday for the next two financial years. Origin shares closed at $6.10 on Tuesday before being halted from trading pending the institutional part of the raising, structured as an underwritten four-for-seven entitlement offer at $4 a share. The stock is due to resume trading on October 6.
Mr Leitch added that he saw the measures announced on Wednesday as boding well for Origin's share price, but pointed out the significant difference in Origin's position on some key issues from just two months ago at the full-year earnings briefings in August. "We're now seeing the shift in narrative that perhaps should have featured earlier in the oil price slide, with capex reductions, asset sales, cost management and dividend cut all on the table," JPM analyst Christopher Laybutt said in his report to clients. He said the measures "effectively put the company in a position to seek an upgrade to BBB should expectations play out."
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