Broker Coverage

Some good broker coverage beginning to appear, and decent price targets. No doubt supporting the uplift today:

Origin Energy reported a solid 2Q result, with strong growth in energy market gas sales (up 10% YoY), and an in-line result from APLNG offsetting what GS expect to be near-term weakness in electricity demand, which GS note will be cycling softer comps through the 2H FY19. GS upgrade their FY19 Energy Markets EBITDA forecast to A$1,577mn. They sit in the top half of the guidance range of A$1,500-1,600mn due to: 1) continued rising gas demand, particularly business sales; 2) cost out-initiatives; and 3) easing customer churn. 

GS's focus at the 1H19 result will be: 1) updated outlook commentary from management with rapidly rising wholesale electricity prices beginning to play out in line with GS's thesis; 2) progress towards cost-out initiatives at APLNG and Energy Markets (including the repricing of derivatives); and 3) refinancing of the APLNG project finance debt as flagged at the December Strategy Day. 

GS has ORG on its Conviction Buy List with a 12-month target price of A$10.35/share. After the Federal election (due by May 2019), GS would expect to see increased regulatory certainty for the Australian energy sector as the political landscape becomes clearer. 

Some good coverage this week in advance of the half yearly results.

Regards,
CB