{"id":60877,"date":"2012-11-12T12:42:54","date_gmt":"2012-11-12T01:42:54","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/11\/12\/origin-cuts-guidance-brokers-stay-positive\/"},"modified":"2012-11-12T12:42:54","modified_gmt":"2012-11-12T01:42:54","slug":"origin-cuts-guidance-brokers-stay-positive","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/11\/12\/origin-cuts-guidance-brokers-stay-positive\/","title":{"rendered":"Origin Cuts Guidance, Brokers Stay Positive"},"content":{"rendered":"

\n\t – Origin lowers earnings guidance
\n\t – Green energy obligations and regulatory uncertainty contribute to changes
\n\t – Earnings estimates and price targets revised
\n\t – Brokers remain positive <\/strong><\/p>\n

\n\t
\n\tBy Chris Shaw<\/p>\n

\n\tAn increase in green energy obligations and regulatory uncertainty in retail tariffs have forced Origin Energy ((ORG)) to lower earnings guidance for FY13<\/span>. The company now expects net profit after tax for the full year will be down 5-10% from FY12<\/span>, against previous guidance of a flat result.<\/p>\n

\n\tAs Deutsche Bank notes, part of the cut to guidance reflects an increased obligation on the part of Origin to purchase electricity from rooftop solar panels and other small scale renewable generators. As well, JP Morgan notes there is evidence of sliding demand, as well as an increase in the rate of costumer switching between providers in October.<\/p>\n

\n\tThe updated guidance from Origin has prompted cuts to earnings estimates across the market. JP Morgan has lowered its net profit after tax forecasts by an average of 7% through FY15<\/span>, while Deutsche now expects a 9% decline in net profit, having previously forecast a flat outcome for FY13<\/span>. <\/p>\n

\n\tConsensus earnings per share (EPS) estimates for Origin according to the FNArena<\/span> database now stand at 80.1c for FY13<\/span> and 84.8c for FY14<\/span>.<\/p>\n

\n\tThe changes to forecasts have impacted on price targets, with Citi's<\/span> target falling to $15.30 from $15.75 and JP Morgan's to $14.25 from $16.15. The consensus price target according to the database is now $15.31, down from $15.65. <\/p>\n

\n\tLooking forward, Deutsche sees valuation upside in Origin at current share price levels but points out this is offset by declining earnings and higher risk leading into the first contributions from the APLNG<\/span> project. The broker retains a Hold rating.<\/p>\n

\n\tCiti<\/span> and JP Morgan remain more confident and continue with Buy ratings on Origin. JP Morgan accepts there are near-term challenges such as stabilising<\/span> market expectations and delivering on revised guidance, while the sell-down of a stake in APLNG<\/span> is also becoming more important from a balance sheet perspective.<\/p>\n

\n\tAs JP Morgan notes, the downgrade in earnings guidance and potential changes to S&P's hybrid criteria make it increasingly likely Origin will face a one-notch cut in credit rating to BBB. With $1.6 billion in headroom over and above remaining APLNG<\/span> capex<\/span> needs and any project overruns that may be encountered, JP Morgan suggests Origin's balance sheet issue is a funding mix one driven by credit rating.<\/p>\n

\n\tA sale of part of its stake in APLNG<\/span> would alleviate the balance sheet issues, JP Morgan taking the view if this is not achieved an equity raising would be more likely to address tighter debt metrics.<\/p>\n

\n\tAllowing for this, JP Morgan suggests the longer-term value on offer in Origin remains intact given more than 30% upside to the broker's revised price target. This is enough to justify an Outperform rating, even though share price outperformance<\/span> is unlikely to be realised<\/span> in the coming months. Most in the market agree as the FNArena<\/span> database shows Origin is rated Buy six times and Hold once. <\/p>\n

\n\tShares in Origin today are down slightly in line with the market and as at 12.00pm the stock was 6c<\/span> lower at $10.36. Over the past year Origin has traded in a range of $10.15 to $15.08, the current share price implying upside of more than 40% relative to the consensus price target in the FNArena<\/span> database. <\/p>\n

\n\t
\n\t 
\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Origin has lowered earnings guidance for the full year and while brokers have responded by cutting earnings forecasts and price targets Buy ratings continue to dominate.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[24],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60877"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=60877"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60877\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=60877"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=60877"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=60877"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}