In today’s daily we have covered stock research on Origin Energy (BUY).









 
The S&P 500 was down by 33 points or 1.62%on Friday to 2002.33 points. U.S. stocks fell sharply on Friday, leaving the benchmark S&P 500 with its worst weekly performance since May 2012, as investors pulled back from the markets in response to oil's free-fall and more weak data out of China. Disappointing data that suggested China's economy softened in November pushed the materials sector down 2.9 percent, making it the worst-performing S&P sector on the day.

The S&P energy sector was down 2.2 percent on the day. It is down 16.5 percent this year, the worst performing of 10 S&P sectors. Dow components Exxon Mobil and Chevron Corp both hit 52-week lows as U.S. crude oil fell below $58 a barrel, hitting five-year lows, on expectations of reduced worldwide energy demand. Oil dropped 12 percent for the week, the 10th weekly slide since the start of October. The International Energy Agency cut its forecast for global demand in 2015.




EXXON MOBIL Daily Chart (Source – Thomson Reuters)
S&P ASX 200was down by 11.4points or 0.22%on Friday and closed at 5219.6 points. Westpac lost 2.9 per cent to $32.05 last week, while Australia and New Zealand Banking Group fell 3.4 per cent to $31, and National Australia Bank slipped 1.4 per cent to $31.95. Qantas Airways was the best-performing stock in the ASX 200 last week, climbing 14.3 per cent to $2.40. The airline, which is a beneficiary of both lower oil prices and a falling dollar, got an added boost from a trading update that showed better-than-expected progress with cost-cutting.
Caltex Australia, which imports and distributes petrol, got a boost from weak oil prices adding 1.6 per cent to $31.63. Woolworths fell 3.2 per cent to $29.86, while Wesfarmers, owner of Coles, lost 1.5 per cent to $41.42. Telstra Corp rallied 0.5 per cent over the week to $5.70, while Medibank added 6.1 per cent to $2.28. Resources giant BHP Billiton slipped 6.4 per cent over the week to a five-year low of $28.46.

Caltex Australia Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - Origin Energy (BUY)

As noted by management at its FY14 results presentation, Org has at its disposal $5.1bn in undrawn corporate debt facilities to fund capital expenditure. In addition ORG generated $1.6bn free cash flow in FY14 and has relatively little exposure to oil prices in FY15. In our view ORG has sufficient liquidity to ride out the current oil price slump without the need to raise equity.


Performance Highlights (Source - Thomson Reuters)

ORG is Australia’s largest vertically integrated energy retailer. ORG has diverse operations spanning the energy supply chain from oil and gas exploration and production to power generation and energy retailing. ORG also has 37.5% interest in Australian Pacific LNG (APLNG), which is expected to commence delivery of cargoes mid – 2015. In terms of ORG’s exposure to APLNG the project continues to track in line with expectations for project delivery and cost.


Financial Highlights (Source - Thomson Reuters)

Furthermore ORG’s retail transformation and cost reduction programmes are set to contribute improved operating performance in the energy markets business over the coming years. While FY15 and FY16 should prove a happier hunting ground for retailers, we assume that the energy markets business will continues to face tough operating conditions. Further catalysts for ORG would be a recovery in electricity demand and retail excellence that could produce upside surprise in the performance of the electricity retail division.


Origin Energy Daily Chart (Source - Thomson Reuters)

ORG’s electricity business could significantly improve margins if prices in NSW and QLD rise following potential deregulation and if global policy shifts to encourage electricity consumption as a result of diminished climate change concerns. In our view the essential strengths of APLNG are quality upstream reserves and strong execution. This will mean the project performs well post startup. Considering the current market conditions we put a BUY on the stock at the current price of $10.91.

 
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