Two stocks that surged on ASX – Origin Energy Ltd and Japara Healthcare Ltd

Origin Energy Ltd

ORG Details
· IPO of conventional upstream business: Origin Energy Ltd (ASX: ORG) stock rose over 2.5% on December 06, 2016, after they reported about divestment (by IPO) of their conventional upstream business, that supplies Australian and New Zealand domestic markets. This move from ORG is a part of their debt reduction program to meet their on-going capital expenditure requirements. The new company formed will be a mid-cap geographically diversified upstream exploration and production firm, which would get listed on ASX with 2P reserves of 948 PJe1 and FY16 production of 75 PJe. The new company will include ORG’s interests in the Otway Gas Project, BassGas Project, Kupe Gas Project, and the Perth, Cooper, Bonaparte and Canterbury basins. On the other hand, ORG is retaining interests in projects like Australia Pacific LNG, Ironbark and the Browse and Beetaloo basins. The transaction is expected to be Earnings per Share (EPS) accretive from FY19 and is expected to deliver an improved return on capital from completion. Additionally, the divestment of ORG’s conventional upstream business would enable ORG to focus on its Energy Markets business and the simplified Integrated Gas business.

· Recommendation: ORG stock rose over 22.29% (as of December 05, 2016) in the last three months and has a decent dividend yield. We give a “Buy” recommendation at the current price of – $ 6.58

 

Assets in New Company (Source: Company Reports) 

Japara Healthcare Ltd

JHC Details
· Transitioning to post-reform income: Japara Healthcare Ltd (ASX: JHC) stock recovered over 11.9% on December 06, 2016 with improving sentiments on aged-care industry. JHC in FY 16 has reported a 16.4% growth in the revenue to $327.3 million and a 5.6% growth in the net profit after tax to $30.4 million. In addition, JHC’s underlying occupancy is at 94.4%, excluding the impact of brownfields and the total operating places is up 15.9% to 3,717. JHC is going to transition to post-reform income (e.g. Daily Accommodation Payments, Additional Services, and Significant Refurbishment) from pre-reform income (e.g. bond retention and accommodation charges). The majority of the revenue and EBITDA growth is expected to come from capacity expansion. In addition, JHC has finished 2 brownfield projects in FY16, adding 54 places, has secured 4 new Greenfield sites and 5 projects are currently under construction for completion in FY17.

· Recommendation: JHC stock rose over 13.51% (as of December 05, 2016) in the last three months. However, JHC stock was under pressure as they forecasted a low single-digit ACFI growth in FY17. Moreover, the stock is trading at a high P/E. We give an “Expensive” recommendation at the current price of – $ 2.21

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.