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Some nice charts here from Morgan Stanley tell the tale of Origin self-destruction. First a look at the historical earnings mix:
ORG EPS growth has historically been driven by its local energy retailing business. A plodding utility-like business in which ORG did well. However, APLNG changes everything and turns ORG earnings instead into a highly cyclical oil play.
Second, and this is the money chart, if you invest in major capex that delivers really poor returns you basically become a balance sheet black hole that eats capital and we can see this process playing out in ORG’s reported profit versus its writedowns:
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.