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Highlights

  • Goldman Sachs sees nearly 100% upside for Viva Energy Group shares
  • Viva Energy's dividend yield forecasted to reach 7.3% by FY 2027
  • Analysts revise earnings estimates for Viva Energy based on quarterly update

Goldman Sachs has identified Viva Energy Group Ltd (ASX: VEA) as a potential deep-value stock within the ASX 200, projecting significant upside over the next 12 months. Following a quarterly update from the fuel retailer, the broker sees a compelling opportunity in its shares, which are currently priced at AU$1.53.

The quarterly update highlighted that Viva Energy is on track to meet its 2025 guidance, with the company forecasting EBITDA of AU$270-330 million across its Convenience and Commercial businesses for the first half of 2025. The second half of the year is expected to see cost reductions and earnings growth, with potential earnings improvement of AU$105 million.

Goldman Sachs' analysts are particularly optimistic about Viva Energy's cost-saving initiatives, which they expect to deliver around AU$160 million in EBITDA by 2026. This contributes to their revised EBITDA projections, which estimate a total of AU$700-820 million by 2026, excluding further earnings improvement from the company’s ongoing business transitions.

Despite recent softness in refining earnings, Goldman Sachs believes the market has undervalued Viva Energy's shares. As a result, the broker has maintained its "buy" rating with a price target of AU$3.00 per share. This price target suggests almost 100% upside from its current price.

In addition to potential capital appreciation, the broker forecasts an attractive dividend yield for Viva Energy investors. The expected yield for FY 2025 is 4.5%, with an increase to 5.5% in FY 2026, and 7.3% by FY 2027. With the company's strategic initiatives in place, analysts are optimistic about its trajectory, making Viva Energy Group a stock to watch in the coming year.