WPL outed - part 2

Further to my post yesterday......

It interesting that the discussion on this thread during the week was leaning towards ‘when to jump off’ rather than any medium or long term enthusiasm for the stock. I understand this - I’ve ridden it up to $27 and back down to $20 last year so there’s a temptation to cash out at least part of your holding after the run we’ve had these past 6 or 7 weeks.......and of course there’s always the ESG noise in the background (that sometimes moves to the foreground)..... that’s off putting too.

However

There are many reasons I’m going to ride this baby a while longer. Too often in the past I’ve jumped off a stock that was only in the early stages of a major market re-rate.....too eager to take profits.

So here are the reasons :

- Despite the prospect of Iranian oil effecting the supply dynamic the macro situation is still very much in our favour. Under investment in oil and gas and recovering world economies favour high oil prices continuing and if WPL can deliver those sorts of results on a $60per barrel average they can deliver results a whole lot better again this half if oil prices stay elevated.

-The merger with BHP makes WPL a real heavyweight on the ASX and all sorts of weighting’s will need to be adjusted ..... solid buying support for WPL on this basis alone.

-Meg’s connections in the US make the US listing much more likely than under Coleman and off the back of these latest results with a flying oil price what better time to do it ? ....and we know US markets are far more supportive of the oilers than here.

- Meg can surprise the market anytime with a big positive announcement on Sangomar - with the current worldwide oil and gas situation that asset looks more attractive to prospective ‘buy in’ parties every week.

- the dividend announced this week hit the market between the eyes but adjusted calculations of WPL’s trailing dividend yield is still distorted by the pissant previous half year dividend of $0.41. The next dividend could easily be around the size of the one just announced. So then the yield calc becomes $1.46x2/$27.44 giving you a fully franked 10.6% dividend - that will really draw in the yield chasers - something WPL hasn’t done for a few years. Not hard to see the sp being chased up to $30 given $1.46x2/$30 is still a fully franked 9.7%. (Note all based on the pre merger WPL)

This time last year WPL didn’t have the above positives all lined up in a row ......for a start it was coming off a massive loss and a dividend scaled back to peanuts. Throw in the ESG issues and it was an easy stock for fund managers to shun for most of last year.

“This time is different” is a dangerous and frequently mocked phrase in investment circles I know ...... but I think it really does apply to WPL.

......and apart from all that there’s this :

“According to a recent analysis by US bank JPMorgan, a Russian invasion of Ukraine could drive the price of oil to as high as $150 a barrel, if the conflict resulted in supply issues”

Obviously an invasion would send stockmarkets tumbling - but WPL would generate incredible cashflows at $150 a barrel so continues to be a great defensive hedge against a Russian invasion as well.

Looking forward to WPL finally pushing past $30 in coming months.