Overshooting Targets

Origin Energy has sold its Darling Downs pipeline to the China- and Singapore-owned pipeline network operator Jemena for $392 million, with completion expected by 30 June 2017. According to the company, the sale price represents multiple of 16.9 times FY18 operating earnings.

 

Following the recent sale of Stockyard Hill Windfarm for $110 million, the Darling Downs pipeline sale now completes Origin Energy’s divestment program which was announced in September 2015. Net proceeds from the sales have amounted to circa $1 billion, ahead of the $800 million target, and will cut the company’s net debt to below $8.5 billion by June 2017, well below the originally targeted $9 billion.

 

Further proceeds are likely to come from the sale of Lattice Energy. The company indicated, however, that while it was continuing to advance the divestment, a sale was now expected sometime in 2017 versus the previous indications of mid-year.

 

Ord Minnett notes that the pipeline sale is also a positive read-through for APA Group (APA, Buy), which trades on circa 13–14 times consensus operating earnings. At 16.9 times FY18 consensus operating earnings, APA stock would be valued at circa $14, versus the current price around $9.60.

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