Today, the spotlight is on Origin Energy Ltd (ASX.ORG) and Medibank Private Ltd (ASX.MPL) as we look into their FY22 results and future outlook...
Origin Energy Ltd (ASX.ORG)
Although Origin's FY22 result was in the wake of sky high gas prices, the report still fell below market expectations. Origin achieved a +29% increase in underlying profit to $407m as well as a +$32m increase in free cash flow to $1.062bn. Origin’s FY22 dividend of 16.5 cents per share (cps) was a +45% increase on FY21. However, Origin’s management cautioned that energy markets were uncertain and therefore guidance for FY23 was not released which investors did not take lightly as share prices dropped on open.
Origin's APLNG project was the key driver of Origin’s results, being responsible for $820m of Origin’s earnings. Origin recently divested 10% of the project for a $2bn consideration, lowering their stake to 27.5%. This appears to be a questionable decision given the significant cash flow benefits provided prior to divestment. Furthermore, Origin are continuing to invest in renewable energy to replace coal fired power. Origin still expects higher earnings for FY23 due to APLNG’s largely fixed price supply portfolio and lower operating/capital expenditure. Lastly, while Origin’s APLNG project provides some benefit, electricity earnings will likely remain suppressed due to higher energy costs.
Medibank Ltd (ASX.MPL)
Medibank reported a solid result, with health insurance operating profit up +10% to $592.6m. Due to a -$24.8m loss in net investment income, Medibank found their NPAT was down -10.7% to $393.9m, a $144.8m turnaround from FY21. Recent volatility in markets has caused many insurance companies to report distinct losses due to mark-to-market valuations. However, these losses will be largely reversed. Insurance companies will look to hold investments until maturity and roll over their investment portfolio into higher yielding securities. On top of an expected 2.7% growth in policyholders in FY23, Medibank’s health insurance saw an increase in it's resident policyholders, resulting in premium revenue up +2.7% to $6.8598bn. Additionally, Medibank’s health segment recorded +44.9% growth in its profit to $45.5 million. Lastly, looking forward as cost of living is expected to increase, it is likely more people will be downgrading their cover which will be a small headwind for the business.
Disclaimer: ORG is currently held in TAMIM portfolios.
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