Wilson Asset Management weekly: Origin Energy and SG Fleet results

Chris Stott

As reporting season continues this week we have seen many companies provide conservative outlook statements for the year ahead, confirming a backdrop of moderate earnings growth. Among the themes to emerge is companies reinvesting into their businesses to drive growth in a relatively anaemic economic environment. In this week's report we provide a brief summary of Origin Energy and SG Fleet's results.

Market overview

The S&P/ASX All Ordinaries Accumulation Index closed up 1.3% for the week. Telstra (ASX: TLS) was the largest detractor in the Index this week after it surprised the market announcing it expects to cut its total dividend for FY2018 to 22 cents per share, down 29%. Shares in Telstra plunged more than 10% on the day and closed down 6.0% for the week. We do not own Telstra in the investment portfolio. On Tuesday, minutes from the Reserve Bank of Australia’s (RBA) August board meeting showed it is weighing up factors such as higher wages, household debt and the stronger Australian dollar. On Thursday, unemployment figures from the Australian Bureau of Statistics (ABS) showed unemployment falling to 5.6% in July, its strongest five-month period in more than 12 years.

Origin charges on

On Wednesday, Origin Energy (ASX: ORG) announced its FY2017 results, reporting a statutory loss of $2.2 billion, principally driven by an impairment charge (post tax) of $3.1 billion. The company noted a strong year ahead on the back of surging Australian electricity and gas prices and potential cost-cutting at its Australia Pacific LNG project. We believe Origin has made progress towards its commitment to reduce debt and gain an investment grade credit rating. Shares in Origin closed up 8.4% for the week. We own Origin as a market-driven investment in WAM Leaders and Century Australia.

SG Fleet driving forward

On Tuesday, SG Fleet (ASX: SGF) announced its FY2017 results, reporting underlying net profit after tax and amortisation (NPATA) of $68.7 million, marginally ahead of its previous guidance of $65.9 to $68.6 million. The stronger-than-expected result reflected organic growth in the company’s fleet management division which benefitted from increasing demand for tracking and diagnostic solutions and several major contracts that were on-boarded successfully during the year. With a strong balance sheet, we expect SG Fleet to be on the lookout for acquisitions in the coming year. Shares in SG Fleet closed up 10.3% for the week. We own SG Fleet as a research-driven investment in WAM Capital and WAM Research.

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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:TLS ASX:SGF ASX:WAM ASX:WAX ASX:WLE ASX:CYA

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