Despite the various city lockdowns and restrictions on travel,
-Total fuel sales volumes now ahead of pre-pandemic levels
-
-Upside likely from the "future fuels" options at Geelong
The agriculture, resources and regional transport sector have provided
In the company's update, retail and commercial fuel volumes were well ahead of forecasts as were refining margins. The commercial segment appeared to benefit from new contracts as well as contract retention, Credit Suisse observes, along with retail fuel from the regionally-oriented Liberty network.
Retail margins have outperformed the industry, falling just -2c per litre year-on-year on the broker's estimates which compares with a -6c per litre decline for the industry based on
Guidance for operating earnings (EBITDA) of
The broker is also impressed by Viva's ability to capture market share in both retail and commercial fuel. Retail markets, the company pointed out, have absorbed price increases while returns have been solid.
Macquarie believes the beat to earnings expectations has been largely driven by a material capture of market share as well as better fuel margins. Penetration into premium fuel should also continue to support earnings growth,
The broker notes total fuel volumes are now above pre-pandemic levels amid strong diesel demand in regional
Dividends
The near-term implication from the update is the likely reinstatement of dividend payments at the first half result in August, and Credit Suisse assumes a 50% pay-out. In addition, Macquarie anticipates a return of up to
Goldman Sachs also believes a return to ordinary dividends is increasingly likely for the first half and expects an interim 2.9c per share. The broker expects performance will be supported in the second half by a recovery in macro conditions and improving returns on equity, including a
Refining
Refining margins were
Macquarie assesses, following the government's deal to fund 50%, the upgrade work to the refinery's clean fuels will be brought forward to 2022 from 2024. The Commonwealth subsidy for refining, intended to secure the country's refining capacity, was passed into law on
This fuel security package is expected to last to
An update on the LNG terminal and hydrogen plants are expected in August and Macquarie ascertains Geelong should now be consistently positive in terms of cash flow, except during any clean fuels upgrades.
The broker envisages upside from fuel marketing and the options for future fuels at Geelong while Goldman Sachs believes the refining subsidy will lower the risk profile of Australian refiners and provide stronger corporate appeal.
Goldman Sachs, not one of the seven stockbrokers monitored daily on the FNArena database, has a Buy rating and
FNArena is proud about its track record and past achievements: Ten Years On
All material published by
© 2021 Acquisdata Pty Ltd., source