The Origin Energy Ltd (ASX: ORG) share price is down around 18% over the past year as the electricity retailer and liquefied natural gas producer posted a statutory net profit after tax of $796 million for the six-month period ending December 31 2018.
Underlying earnings per share for the period came in at 33.7 cents with an interim dividend of 10 cents per share. As such the stock trades on just 10x annualised earnings and a 2.8% yield.
Origin Energy has a market value around $12.5 billion and plenty of institutional shareholders including Melbourne-based Yarra Capital. Its Australian Equites Fund has an 'overweight' position in the group.
"We are overweight the company on the grounds that its recent initiatives to simplify the business will unlock value. Asset sales have substantially reduced balance sheet leverage and focused attention on its key assets – the Energy Markets business and APLNG project. The implied valuation of both the Energy Markets business and APLNG remains conservative, with an eventual demerger of both businesses or sale of APLNG the critical next step in crystallising this value."
As a substantial LNG producer and seller Origin has some leverage to LNG prices that are directly linked to wider oil and energy market prices. As such its shares price will swing to some extent with the broader oil price. Investors then should expect a volatile ride, with Origin potentially offering strong returns assuming energy prices hold higher.
Others to consider in the LNG space include Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO).
