ORG was the standout stock on the day, surging 6.8% after the UK’s largest electricity and gas retailer, Octopus Energy, announced plans to demerge its technology platform Kraken, valued at ~GBP10 billion. Kraken Technologies, developed in-house by Octopus, offers a platform for managing energy system components, including customer billing and renewable resource management. It currently serves around 70 million customer accounts globally and aims to reach 100 million by 2027. On the surface, the move appears logical and well-timed. ORG owns a handy 23% stake in Octopus and will receive Kraken shares as part of the move. ORG could see a substantial windfall from the demerger, potentially prompting it to consider returning capital to shareholders down the track or reinvesting in zero-emission generation projects.
- To put the numbers into perspective, ORG has a market cap of ~$20bn and is about to receive ~$4.8bn worth of unlisted Kracken shares. Plus, it will still own 23% of the remaining Octopus Energy.
- We now believe ORG will attract buying into dips, supported by its estimated 5.2% fully franked yield over the coming 12-months, with this news an added healthy tailwind.
MM is cautiously bullish towards ORG around $11.50
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