ASX:ORG

We recommend investors begin accumulating Origin Energy at current levels.

The company will reinstate their dividend in February and the current sell-off will likely prove to be a substantial low.

Origin

We recommend accumulating Origin on the current share price pullback

Buy zone $7.50 – $8.00.

We will update the initial upside target in a future posting once the stock re-establishes upside momentum.

Origin Energy

Origin Energy has sold off due to a  slightly lower earnings and the ACCC intervening into retail electricity pricing.

At $8.00, ORG looks compelling value and we recommend accumulating the stock within the $7.50 – $8.50 range.

Origin Energy

Origin continues to form “higher high and higher low” price structures and remains one of the best performing stocks in our model portfolio.

The recent 4Q production report helps support the earnings recovery and we feel the share price trades within the $9.50 – $10.50 range.

4Q18 revenue of A$570 million was ahead of consensus with higher volumes and higher realized domestic LNG prices.

FY18 revenue is forecast at $15 billion, EBITDA $3 billion, EBIT $1.5 billion generating EPS of $0.55 per share.

In FY19 we expect earnings to grow by 20% and the company to payout 50% in dividends, placing the stock on a 3% forward yield.

In FY20, both increasing profit and payout ratio will then lift the dividend to $0.60 per share placing ORG on a FY20 yield of 5.5%.

Origin Energy

The uptrend in the Origin share price is well established and the stock now trades near full value.

We continue our buy-side interest, although we recognize a period of consolidation over the next 6 months is likely.

At the upcoming earnings result, we’ll be looking for commentary from the company on reinstating dividends and progress on the debt reduction program.

Origin is a recommended buy-write strategy within the ASX Top 50 model portfolio.

Consensus earnings forecasts are looking for 23% EPS growth supported by higher energy prices and ramp up of LNG revenue.

On May 30th, ORG was added to the ASX Top 20 index to replace the dissolved  WFD entity.

Since many Super funds and managed equity firms have a mandate to hold a percentage of listed index shares, we expected ORG to get a boost from the listing.

Since then, the share price has risen by over 8% and posted a 3-year high at $10.27 on Monday.

ORG will release its Quarterly report on July 31st and it looks like the share price could slip lower in front of that announcement.

With the expectations of FY18 NPAT rising by up to 2.6%, we see scope for the stock to hold the $9.20 support level and reach the $10.60 price range after the quarterly report.

Origin Energy

Shares of ORG have a stable outlook, but are approaching an overbought condition relative to its fundamentals.

A mild Summer combined with reduced weather related events has seen a drop in demand which could act as a headwind to significantly higher share prices.

Our ALGO engine triggered a buy signal for ORG on February 13th at $8.30. Since then, the share price has run into resistance twice at $9.40.

We suggest that investors can look to sell the $9.50 calls to increase cash-flow enhance overall portfolio returns.

Origin Energy

We recommend buying ORG Energy when the short-term indicators turn positive. We expect the entry level will be confirmed early next week.

Keep this one on your watch list.

Origin