Viva Energy Group Limited
Viva Energy Group Limited (ASX: VEA) operates an oil refinery in Victoria. It conducts its businesses in the following segments - Retail, Fuels and Marketing, Refining, Supply, and Corporate and Overheads.
Business Updates:
- The company experienced strong demand for refined products, particularly diesel, across the globe due to the continued lockdown in China and supply shortages owing to sanctions imposed on Russia.
- Given this backdrop, it had realized the Actual Geelong Refining Margin of US$26.4/bbl in April 2022 as compared to US$11.5/bbl in March 2022.
- For four months ending April 2022, the company posted a 65% uptick in unaudited EBITDA to reach $308 million.
- VEA has become a reliable supplier of fuel in the Australian market through a mix of locally refined products and imports.
- In Q1FY22, it had realized volumes of 3,288ML as compared to 3,030ML in the prior year.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of VEA delivered gains of ~6.83% in the past three months and ~16.67% in the past six months. The stock of VEA is approaching its 52-week high price of $2.860. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price with a correction of low double-digit (in % terms). The company can trade at a slight discount to its peers, considering its exposure to geopolitical headwinds. For the purpose of valuation, peers such as Washington H Soul Pattinson and Company Ltd (ASX: SOL), Woodside Petroleum Ltd (ASX: WPL), Santos Ltd. (ASX: STO), and others have been considered. Considering the decent stock returns in the past periods, downside indicated by the valuation, volatility in crude prices, and other key business risks, we suggest investors to book profit and give a ‘Sell’ rating to the stock at the current market price of $2.760, as on as of May 12, 2022, at 11:22 AM GMT.
VEA Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.