Origin Energy has retained its distribution guidance from its APLNG stake, which was under threat from the oil price collapse. APLNG contracts have a long lag to oil prices, the broker notes. The company has also reiterated energy markets guidance, albeit with the caveat of a possible jump in bad debts, which in the context of the number of companies simply withdrawing guidance should be considered a positive, the broker suggests.
Management has made no mention of the credit rating impact, although the broker suspects the ratings agencies would be prepared to look through any temporary breach of debt to earnings covenants. Buy and $5.95 target retained.
Target price is $5.95.Current Price is $4.95. Difference: $1.00 – (brackets indicate current price is over target). If ORG meets the Citi target it will return approximately 17% (excluding dividends, fees and charges – negative figures indicate an expected loss).