After five months of consecutive gains, the ASX200 went backwards in September despite a courageous effort from gold miners.

-ASX200 loses -0.8% (total return) in September
-Materials the only winning sector
-Gold the substantial driver of materials
-Weak month for some favoured heavyweights

By Greg Peel

September is, historically, the worst month of the year for the stock market. However, that trend has become diluted over recent years.

The trend more specifically pertains to Wall Street, to which the ASX200 has historically been anchored, but that correlation has also become diluted in recent years on a divergence of market-driving sectors.

Yet, September this year was indeed a weak month for the Australian stock market, breaking a five-month winning streak for the ASX200. The index closed down -1.4% for the month, for a total return of -0.8% (including dividends).

By contrast, the S&P500 rose 3.5%, underscoring diminishing correlation. The clue here is in the Nasdaq, which shares the Magnificent Seven with the wider index and rose 5.6% on the ever-inflating AI theme.

For Australia, index performance would have been substantially worse if not for the contribution of the materials sector, completely dominated in the month by the ongoing surge in the gold price.

Excluding dividends, the ASX200 materials sector rose 4.6% in September, to be the only sector with a positive performance for the month. All other sectors saw losses, led by energy (-10.6%), consumer staples (-5.6%) and healthcare (-4.9%) in terms of percentage moves, and financials (-1.5%) in terms of market cap impact.

Glittering

Within materials, the gold miner sub-index rose 24.4%. History shows gains in gold mining stocks typically lag gains in the gold price. This has again been the case in 2025. It takes a while for investors to cotton on.

While the energy sector is beholden to oil prices, September’s withdrawal of Abu Dhabi National Oil Co’s (consortium) takeover bid for Australia’s second largest oil & gas producer Santos ((STO)) dragged down all energy peers. It is questionable whether the bid would have ever made it past the FIRB.

In staples, woes continued for Woolworths Group ((WOW)) post a shock FY25 result and guidance in August. In healthcare, sector behemoth CSL’s ((CSL)) share price was trashed in August on the withdrawal of margin recovery guidance and restructure plans, and the mood did not improve in September following Trump’s social media announcement of 100% tariffs on imported pharmaceuticals (CSL has since played down the impact).

Within financials, falls in financial services and insurance companies drove weakness more so than banks, albeit some of the gloss came off Commonwealth Bank ((CBA)) in the month. The RBA’s on-hold September rate decision was also a drag.

Returning to gold, outperformance was not constrained to ASX200-listed miners. Morgan Stanley points out while there were 30 gold miners in the Small Ordinaries index in 2012 and only 18 now, gold’s weighting within the sector has reached 14% of all small caps.

Within large caps, the addition of Genisis Minerals ((GMD)) and Ramelius Resources ((RMS)) into the ASX100 has taken gold stocks to 3.6% of all large caps, eclipsing 2012 levels and matching the covid peak.

Individuals

Morgan Stanley notes the most value for the ASX200 was added in September by gold miners Northern Star Resources ((NST)) (up 27.0 basis points) and Evolution Mining ((EVN)) (17.2). While the winners on pure percentage were gold miner Regis Resources ((RRL)) (33.7%) and, bucking the trend, Droneshield ((DRO)) (44.7%). Thank you Ukraine.

The most index value was lost by heavyweights Woodside Energy ((WDS)) (-24.0 basis points) and CSL (-22.0), while the worst performers were intellectual property services company IPH Ltd ((IPH)) (-21.9%) and still struggling autoparts distributor Bapcor ((BAP)) (-19.1%).

Morgan Stanley cites likely switching amongst the banks, with CBA down -21.2 basis points while National Bank ((NAB)) outperformed.

Macquarie Group ((MQG)) also had a weak month as did another index heavyweight, data centre star Goodman Group ((GMG)).

Commodities

A down-month for the ASX200 for September belies the performance of commodity prices for the month –- typically an index driver.

I might have mentioned gold – that was up (USD terms) 11.0% in the month to be up 47.0% in 2025, but outshone by little brother silver (19.9% and 55.7%).

Copper starred among the base metals (8.0%; 19.8%), aided by a temporary shutdown of a major mine in Peru. There were contrasts among the others, with zinc up 5.6% for the month, but down -1.1% for the year to date, and nickel up a mere 0.3% and down -4.3% for the year. Aluminium put together a double; up 2.7% and 6.3%.

Uranium went nuclear in September with a 10.3% monthly gain within a 14.9% gain year to date, while iron ore has been largely static of late, up 3.6% for the month but only 1.5% for the year.

Fears of global slowing brought about by you know who have seen West Texas crude down -9.1% for the year and -1.7% in September, with Brent down -8.0% and -1.4%.

ASX100 Best and Worst Performers of the month (in %)

ASX200 Best and Worst Performers of the month (in %)

ASX300 Best and Worst Performers of the month (in %)

ALL-TECH Best and Worst Performers of the month (in %)

All index data are ex dividends. Commodities are in USD.

Australia & NZ

The World

Metals & Minerals

Energy

Editor’s Note when viewing the graphics below: all updates include early trading sessions in September.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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Origin Energy’s valuation potential rests to a great extent on the possible demerger of Kraken from minority-owned Octopus Energy. But as to when this might happen is unclear.

-Focus on de-merger of Kraken from Origin Energy’s minority-owned Octopus Energy
-The if/when scenario remains unclear
-Analysts split on energy market and APLNG outlooks
-Origin released in-line FY25 result, share price rallied

By Greg Peel

In early July, the share price of Origin Energy ((ORG)) shot up on press reports Octopus Energy was seeking to de-merge its Kraken Technologies business.

Origin Energy is an Australian integrated energy company providing power generation, energy retail, and natural gas production. Octopus Energy Group is a UK-based, global clean energy technology business, driving the renewable energy transition. Origin owns 22.7% of Octopus. Octopus owns Kraken, a global customer management SaaS platform.

Analysts agree a de-merger of Kraken from Octopus would drive considerable valuation upside for Origin. The Octopus Energy retail business now has around 14m customers, with the Kraken platform now boasting 74m customers around the globe, noting the aim is for 100m accounts on the platform by 2027.

Heading into, and out of, Origin’s FY25 result release in mid-August, the five brokers monitored daily by FNArena covering Origin Energy were split into two Buy or equivalent ratings, two Hold and one Sell. While analysts assessed the performance of Origin’s Energy Markets business and APLNG gas production and guidance, a Kraken de-merger was front of mind with regard potential upside.

Morgan Stanley (Underweight) continues to prefer energy markets rival AGL Energy ((AGL)) over Origin Energy, on which it has an Equal-weight rating, based on forecast total shareholder return upside.

However, while Origin is less preferred by Morgan Stanley within the peer group on valuation grounds, the broker acknowledges a potential Kraken monetisation remains a key risk to its Underweight thesis.

Will Kraken Wake?

Last week UBS released a report suggesting Origin’s stake in high-growth utility Octopus Energy can provide the company with a number of positive catalysts and valuation support over the year. As Octopus’ Kraken platform accelerates its global licensing growth, UBS believes the risk/reward for Origin shareholders is “compelling”, with risk skewed 4 to 1 to the upside.

UBS sees potential catalysts providing market implied valuations for both Octopus and Kraken -- initially via full financial separation and, “if press reports come to fruition”, possibly via an IPO of Kraken.

The broker values Octopus (Retail) at $1.10 per share and Kraken at $1.71, however, UBS’ upside scenarios could add a further $2.70 per share net to Origin.

Origin remains UBS’ (Buy) most preferred Australian Utilities exposure.

The aforementioned press reports suggested back in July that Octopus Energy is considering spinning off Kraken “within the next year”.

At the conference call following Origin’s FY25 result release in August, Origin’s CEO said:

“We're focused on the separation of those businesses, which leads to choices and opportunities. We will assess investments based on the best choices for allocating capital. If Kraken becomes a separate entity, it will present choices, and we'll keep the market informed. It's early to predict how we might realise value, but we're supportive of the separation.”

In its result assessment, Ord Minnett (Hold) noted Origin is suggesting extra funding over several years may be needed to provide the foundation for earnings growth before a separation of the Octopus and Kraken businesses, with the mooted Kraken IPO, which would provide a capital return to Origin, being several years beyond that.

Which brings into question Octopus’ suggestion it is considering spinning off Kraken “within the next year”.

Not All About Octopus

Much attention rests around Octopus Energy, Macquarie noted in its Origin result assessment. One-offs in FY25 meant Octopus’ performance fell short of expectation, but fundamental drivers in profit per retail customer and Kraken's annual recurring revenue per customer grew.

Conversion of Kraken to a separate entity is the focus, Macquarie noted. The timing of separation/capital raise is significant, with separation first, then capital raise providing Origin the decision to grow its interest in Octopus.

Macquarie also believes Origin’s valuation looks to be pricing much of the Kraken IPO into the share price already, when core assets like Energy Markets and the APLNG valuation outlook appear flat. To that end, Macquarie retains Neutral on Origin.

Citi’s view nevertheless is that Origin is well positioned to benefit from volatility through the energy transition. As coal power assets are retired from the National Energy Market and we see a higher mix of variable renewable energy, Origin's portfolio of gas peakers and battery assets should capture the value of price volatility, Citi believes.

APLNG is a worldclass LNG project, Citi notes, and produces above nameplate capacity with sufficient 2P reserves to cover LNG sales & purchase agreements beyond 2035.

Citi is “optimistic” on the growth trajectory of Octopus and its flagship Kraken platform, seeing value accretive potential of further leveraging this software in both the Octopus business and with Origin in Australia.

Citi expects this would reduce the cost to serve customers, maintain customer satisfaction, reduce churn levels, and optimise portfolio load, reduce market procurement costs, and maximize shareholder value.

Citi is the other broker with a Buy rating.

While brokers are split on their outlooks and ratings for Origin Energy, with Kraken separation/IPO perhaps vague at this point, rival AGL Energy is rated four Buys or equivalent, following two post-result upgrades, and one Hold (Morgan Stanley) by the same five brokers.

For additional context: AGL Energy was subjected to one of the eye-catching punishments in August with management's outlook triggering a reset in shorter-term forecasts.

The sell-off in AGL shares aided the two upgrades to Buy, as brokers saw the reaction as overdone, pointing to upside from AGL’s battery investment over the longer term.

Origin’s share price jumped on its result release, although analysts saw a largely in-line performance.

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In a solid climate for Engineers & Contractors, Monadelphous’ FY26-27 growth potential stands out, supporting a seemingly rich valuation.

-Monadelphous’ FY25 result beats consensus
-Strong growth forecast for FY26-27
-Iron ore, oil & gas and renewables to drive growth
-Some analysts are predicting a new upgrade cycle coming

By Greg Peel

It was a positive August results season for the Engineering & Contracting sector servicing the resources industries. Macquarie highlights solid demand, earnings margin beats, strong balance sheets, with a number of share buybacks underway, and positive forecast earnings revisions for FY26-27.

A focus on revenue quality, improved terms & conditions and rational market behaviour is contributing to improved margins. A key theme for Macquarie is breadth of end-markets demand, featuring strong stay-in-business iron ore activity and renewables demand now arriving (transmission and electricity infrastructure). Domestic exposures are outperforming global.

For Citi, two Engineering & Contracting companies stand out from the pack; NRW Holdings ((NWH)) and Monadelphous ((MND)).

While Monadelphous’ recruitment activity is back above its historical monthly average, NRW’s job postings are still tracking below their long-term average, Citi notes. However, both enjoy robust order books and pipelines that are beginning to crystallise.

While skilled labour continues to be tight, Monadelphous and NRW have been successful in retaining their talent and continuing to build on their solid near-term top-line visibility. The industry is fast approaching an inflexion point, Citi believes, when it comes to large project awards which have been delayed for a myriad of reasons, such as cost pressures and regulatory headwinds.

For NRW, Citi believes positive momentum should continue but Monadelphous could be on the cards for potential step-change. Recruitment from here on will depend on large project awards and we could be entering a period of heightened hiring spree sooner rather than later.

FY25 Good

Monadelphous delivered a solid FY25 result, with earnings 4% ahead of consensus and profit 6% ahead. The stronger than expected result was driven by better than guided revenue growth. FY25 revenues increased by 12%, which was ahead of the company's guidance for high single-digit growth and consensus of 9%.

For the purpose of underlying numbers, Morgans has stripped out an earnings benefit from insurance proceeds in first half and left in the benefit from FX. This implies normalised earnings up 19% year on year. Earnings margins were strong, Morgans notes, at 6.71%, which is up 43 basis points on FY24.

Normalised profit was up 28%. The second half fully franked dividend was up 18% year on year, taking the full year dividend up 24%, with the company paying out 90% of profit as is customary.

FY26 Better

Looking into FY26, Monadelphous did not provide quantitative revenue growth guidance, but did speak to its confidence in delivering earnings growth in the year ahead. Analysts expect the company will provide formal guidance at the company’s AGM in November.

Monadelphous' outlook commentary points to a strong pipeline of committed work in FY26, with $2.7bn in contracts secured in the energy and resources sectors, along with significant prospects related to decarbonisation.

UBS forecasts FY26 revenue growth of 6% (up from 4% previously). Within this, UBS expects Monadelphous’ Engineering & Construction (E&C) business to deliver 9% growth (up from 5%), supported by recent awards in oil & gas and elevated commodity production levels.

The company’s Maintenance & Industrial (M&I) segment revenues should be supported by ongoing demand from the energy sector. UBS forecasts first half FY26 revenue growth of 13% given an increased oil & gas maintenance turnaround outlook. The broker highlights an increased workforce (up 25% versus the first half FY25), order book (up 22%) and book-to-bill (1.2x) as factors that support the growth outlook.

Monadelphous is more confident than normal regarding its outlook, Macquarie finds, noting it is "positioned for growth in FY26". Stay-in-business iron ore and oil & gas continue to be prospective, and the company is increasingly seeing work across renewables, as the long-awaited spending boom from the energy transition arrives.

M&I saw a second half rebound (revenues up 14% year on year) after a softer first half. Monadelphous expects a heavy turnaround schedule in the second half FY26, which should drive strong growth. Macquarie notes a number of recent contract awards across the energy sector (particularly in LNG).

The order book in E&C is around $570m to start FY26, which is $91m more than Morgans’ original estimate. Using history as a guide, this indicates E&C revenue for FY26 is likely to be between $1050-1170m, Morgans estimates, versus consensus beforehand of $956m.

Morgans sees risk as skewed to the upside, supported by Rio Tinto’s ((RIO)) Pilbara replacement program, with a catch-up in spend expected in the second half of 2025 and strong forecasted spend in 2026 and 2027. Monadelphous’ E&C revenue has historically had a strong correlation with Rio’s Pilbara capex spend.

The other positive takeaway for Morgans is we’re now seeing a revival of oil & gas construction work. Both Chevron’s Jansz-Io compression project and Woodside Energy’s ((WDS)) Pluto 1 modifications project are well underway, with the hook-up and commissioning of Shell’s Cruz platform recently awarded.

Oil & gas work is generally higher margin, Morgans points out, which means, subject to execution, Monadelphous has capacity to surprise to the upside on margins.

Industry conditions remain supportive, Jarden suggests, given strong demand and lessening headwinds from costs.

When assessing the potential outlook for earnings margins, Jarden is confident further accretion could be ahead given: 1) no major ramp-up costs expected for contract mobilisation in E&C works; 2) a commitment to continued earnings margin improvement from management, especially as it relates to labour productivity and on-site performance; and 3) management commentary that labour market conditions remain steady, albeit tight, with the lack of apparent volatility easier to price into contracts.

Too Rich, Surely

Monadelphous' shares have performed strongly this year, and were up around 50% year to date heading into the FY25 result. The combination of a sustainable double-digit earnings per share growth outlook, order book growth leveraged to domestic projects, and minimal global tariff exposure are factors that have supported the stock, UBS suggests.

That left the stock trading at a one-year forward PE of 24x, which is tracking to the upper end of its long-term trading range of 25x, reflecting the double-digit (and domestic) EPS growth outlook.

UBS sees the AGM in November as a potential positive catalyst, assuming the company is likely to provide first half revenue growth guidance, but for now UBS retains a Neutral rating.

Bell Potter also saw Monadelphous’ valuation as rich, heading into the FY25 release with a Sell rating.

Even with the material earnings forecast upgrades post the result, on a more optimistic FY26-27 outlook for E&C and M&I, Bell Potter continues to see a dislocation in fundamentals and sentiment, with the latter driving valuation multiples to prior cycle-peak levels, as UBS notes.

Bell Potter will wait to see if momentum builds for contract wins in the renewable energy generation, storage and transmission sector, which the broker believes is needed to complement rising demand for sustaining capital works, to offset a slowdown in greenfield project development across resources and energy.

On that basis, Bell Potter upgrades to Hold from Sell.

The upgrade cycle for Monadelphous is in full swing, Morgans acknowledges. Although the shares have re-rated materially, Morgans continues to like the stock given significant growth potential in both FY26 and FY27 driven by Rio’s multi-year iron ore replacement program (underpinning strong demand in E&C) and heightened oil & gas turnaround activity in FY26 and FY27 (increasing volumes in M&I).

Although the headline valuation looks stretched, it’s important to note Monadelphous reached circa $20 per share pre-covid in anticipation of Rio’s initial iron ore replacement program. Not only does Rio’s replacement program appear more significant this time around, the higher value M&I business is now 30% larger.

Material outperformance for Monadelphous was always going to hinge upon its ability to recapture pre-FY20 margins, Morgans suggests. The first and second halves of FY25 demonstrated the margin leverage in E&C, which looks set to continue, and positions the company well for an upgrade cycle.

Morgans upgrades to Buy from Accumulate.

While Monadelphous’ FY25 profit beat consensus by 6%, it met Macquarie’s forecast. Macquarie’s FY26 earnings per share forecast is now 9% above pre-result consensus, and the broker sees potential and catalysts regarding near-term contract awards and strong first half revenue guidance at the November AGM.

Macquarie retains Outperform.

Monadelphous’ decision to provide qualitative outlook commentary for FY26 at the full year result reinforces improving near-term topline revenue visibility and expectations of not only replenishment but growth in its order book balance, Citi suggests. As is always the case, there is a question around valuation and earnings yield, but Monadelphous could be in for an upgrade cycle starting on or even before the AGM in three months’ time, in Citi’s view.

On that basis, Citi applies a high valuation multiple to the stock, and post-result upgraded to Buy from Neutral.

That leaves three Buy or equivalent and two Hold ratings among the five brokers monitored daily by FNArena covering Monadelphous. Post the FY25 result, the consensus target has risen to $22.13 from $18.16.

Jarden maintains an Overweight rating and lifts its target price to $21.50 from $18.60 following: changes to earnings forecasts; a moderation in long-term capex forecasts in line with company commentary; and a change in Monadelphous' share price influencing Jarden’s capital structure assumption (remaining net cash).

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FNArena is proud about its track record and past achievements: Ten Years On