Investment Matters

Company news: South32, Origin Energy, Paragon

South32 will place its South African coal assets into a standalone business, with a possible future listing on the Johannesburg stock exchange.  This comes as an investment is required to extend the life of this asset, along with the overshadowing of a difficult regulatory environment (local ownership requirements).

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Origin Energy reaffirmed its FY-18 guidance at its investor strategy day held this week.  FY-18 EBITDA (earnings before interest, tax, depreciation and amortisation) for Energy Markets (excludes APLNG and Lattice) is expected to be in the range of $1.7 billion to $1.8 billion.  This is an increase of 14-21% over FY-17.  Additionally, net debt is on track to be below $7bill, continuing the debt reduction focus (it was >$13bill in FY-15) - which is expected to continue over the next 2 years or so.  Overall. we viewed the presentation for the company's strategy positively.  For instance earnings from the APLNG project are expected to add a material benefit to shareholders in coming years, which we do not consider is currently reflected in the share price.

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Paragon Care has announced the acquisition of an Immunohaematology business for $8.5 million.  It is one of Australia’s leading manufacturers and distributors of Red Blood Cell reagents and blood grouping reagents.  It also distributes automated blood testing instruments, which are used by blood donor centres, hospitals and pathology centres to identify antibodies and antigens in the blood.  The acquisition is expected to be modestly accretive to FY-18 earnings per share.