Wilson Asset Management weekly: Origin and Appen

Chris Stott

The S&P/ASX All Ordinaries Accumulation Index closed up 0.2% for the week. The Australian market again breached the 6,000 mark on Wednesday, while the US market continues to make all time record highs. The surprise announcement of a banking royal commission by the federal government on Thursday weighed on the sector.

In this week's report we discuss Origin and Appen.

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Origin energised

At an investor day on Tuesday, Origin Energy (ASX: ORG) announced it will cut $500 million of costs from its Queensland Australia Pacific LNG joint venture over the next 18 months. The company expects the project to be cash flow breakeven at US$48 barrel of oil equivalent, falling to US$40 by June 2019. We view these targets as conservative and expect Origin will be able to deleverage its balance sheet faster than the market currently anticipates. Shares in Origin closed up 5.7% for the week. We own Origin as a research-driven investment in WAM Leaders and Century Australia.

It’s all Appen-ing

On Wednesday, language and search data service provider Appen (ASX: APX) announced it will acquire California-based competitor Leapforce, positioning the company as the world’s leading provider of search relevance services. The $105.3 million acquisition is expected to be 35% earnings accretive and creates scope and scale for the company to participate in the growing artificial intelligence market. The company also reaffirmed its previous guidance of the upper end of 40% to 50% earnings before interest, tax, depreciation and amortisation growth. Shares in Appen closed up 34.1% for the week. We own Appen as a market-driven investment in WAM Capital, WAM Active and WAM Microcap.


Chris Stott

Chris is the Chief Investment Officer of Wilson Asset Management, having joined the company in 2006. He is also the Portfolio Manager responsible for WAM Capital (ASX:WAM), WAM Research (ASX:WAX), WAM Active (ASX:WAA) and WAM MicroCap (ASX:WMI).

Expertise

ASX:ORG ASX:WAM ASX:WLE ASX:WAA ASX:APX ASX:CYA

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