Woodside poised for big year: Katana AM

Fri 14 Jan 22, 4:40pm (AEST)
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Key Points

  • The energy sector underperformed last year, but could be set for "considerable upside" in 2022
  • Woodside is ideally placed to capitalise on this thematic

Woodside (ASX: WPL) could be set for strong growth this year, according to Romano Sala Tenna from Katana Asset Management. 

In a recent exclusive interview with Market Index, Sala Tenna noted that the energy sector, “sets itself up nicely for considerable upside this year.”

With investors growing increasingly focussed on decarbonisation, the energy sector has significantly underperformed the market over the last year. 

“The energy space has been neglected,” says Sala Tenna. “The ESG overlay has beaten it around pretty aggressively.”

xej vs xjo over the last year - chart

The ASX energy sector (XEJ, shown in blue) compared to the ASX 200 index (XJO, shown in orange), shown over the last year.

“The thematics are very strong,” says Sala Tenna. “We’re starting to see, as economies re-open, a massive underinvestment over the last best part of the decade in the global energy sphere.”

How Woodside can capitalise on this

Woodside is the pick of the bunch when it comes to energy stocks, Sala Tenna says, thanks to trading at a single-digit price to earnings ratio (PE), along with offering a fully-franked dividend. 

“Woodside is set up for an exceptional quarter and a very strong half,” he says. 

He’s not the only analyst who thinks Woodside could do well. 

“Woodside Petroleum shares remain materially undervalued and we think the market underestimates liquefied natural gas (LNG) growth potential,” says Mark Taylor, writing for Morningstar.

“Woodside is highly gas-leveraged and can ship cheaply to Asian markets. Woodside's excellent balance sheet and low costs are particularly advantageous currently given high prices for crude oil and LNG.”

Broker consensus is a strong buy

Written By

Jed Herne

Content & Strategy

After graduating with a 99.4 ATAR, Jed won 3 scholarships to Curtin University, where he earned his Bachelor's degree and served as a Student Ambassador. He is primarily interested in long-term passive index funds as a vehicle for financial independence. Outside of covering financial news, Jed is a published author, podcaster, and has an unhealthy obsession with bouldering.

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