mid-cap

Operational Pressures and Margin Weakness Could Constrain Upside - VEA

Mar 17, 2026 | Team Kalkine

Read Time :10 Mins

Operational Pressures and Margin Weakness Could Constrain Upside - VEA — Image source: shutterstock

VEA:ASX
Investment Type

Mid - Cap
Risk Level
Action
Rec. Price (AU$)

This report is an updated version of the report published on 17 March 2026 at 12:25 PM AEDT.

Viva Energy Group Limited (ASX: VEA)

Company Overview: Viva Energy Group Limited (ASX: VEA) is an Australian energy company engaged in the refining, distribution, and retailing of petroleum and energy products. The company operates the Geelong Refinery in Victoria, one of Australia’s largest fuel manufacturing facilities, and supplies a wide range of fuels and specialty products including petrol, diesel, aviation fuel, marine fuel, lubricants, and bitumen to commercial, industrial, aviation, and retail customers across Australia.

Recommendation Rationale – SELL at AUD 2.075

Technical Standpoint: VEA’s share price has surpassed the R1 level recommended on 13 February 2026. The 14-day RSI is currently at 59.89, having rebounded sharply from deeply oversold levels seen in January–February 2026. While not yet overbought (>70), the RSI is approaching a level that has historically acted as a resistance ceiling for VEA.
Leverage & Balance Sheet Stress: Closing net debt reached AU$2,074.8 million at 31 December 2025, a AU$281.3 million increase versus FY2024's AU$1,793.5 million. At 3.0x Net Debt/EBITDA (RC), VEA's leverage materially exceeds the 2.0–2.5x range typically tolerated by investment-grade downstream energy peers. The company's own guidance to reduce gearing to ~2.0x by end-2027 is explicitly conditioned on 'capital management initiatives taking effect and market conditions improving'.
Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/EBITDA, Price/Cash Flow, Price/Earnings, and Price/Book) are higher than median of the Energy sector.
Earnings Quality and Dividend Sustainability: The 36.0% YoY reduction in total dividends to 6.77 cps in FY25 (from 10.57 cps in FY24) is a critical red flag. With NPAT (RC) down 27.8% to AU$183.6 million and Underlying FCF down 35.3% YoY to AU$87.4 million in FY25, the Group's capacity to sustain or grow its dividend is constrained.

Daily Price Chart

(Daily Technical Chart; Source: REFINITIV)

Valuation Methodology: Price/Cash Flow Multiple Approach (FY Dec'26E) (Illustrative)

VEA can trade at a slight discount that its peers considering the 35.3% and 36.0% YoY decline in FY25’s Underlying FCF and Dividends per share, respectively. For conducting the valuation, following peers have been considered - Woodside Energy Group Ltd (ASX: WDS), Santos Ltd (ASX: STO), and Amplitude Energy Ltd (ASX: ALD).

Given the stock has surpassed its R1 level, macroeconomic conditions, risks associated, it is prudent to sell the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 2.075, as of 17 March 2026, at 11:50 AM AEDT.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 17 March 2026. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which 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 at which 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: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.

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