Viva Energy – Australia’s largest IPO since Medibank Private

Eleanor Creagh

Australian markets strategist, Saxo Bank

A leading integrated downstream petroleum company – operating for over 110 years in Australia

Viva Energy supplies 24% of the Australian downstream petroleum market, representing approximately a quarter of vast country's fuel needs. The company supplies through a nationwide 1,165-strong retail network of service stations, the majority of which are Shell branded, which has strong brand recognition. Viva has the sole right to use the Shell brand in Australia for the sale of retail fuels, operated through a retail alliance with Coles, one of Australia’s largest supermarket retailers.
Viva Energy is a leading supplier of fuel, lubricants, and specialty products to commercial customers in the aviation, marine, transport, resources and construction and manufacturing industries. 52 airports and airfields across Australia are supplied by Viva Energy.

Viva Energy owns and operates the Geelong Refinery in Victoria which contributes 25% of its earnings. This plant converts imported and locally-sourced crude oil into petroleum products including gasoline, diesel, jet fuel, aviation gasoline, gas, solvents, bitumen and other specialty products. These products are then distributed through Viva’s retail and commercial operations. This is Australia’s largest conversion capacity refinery. Additionally, Viva own 44 import terminals and depots throughout Australia giving them a competitive edge through ownership of supply chain assets. 

IPO details

Indicative pricing is between $2.50-$2.65 a share, to raise $3.06bn giving a potential market cap of $4.8bn to $5.1bn.
FY19 EV/EBITDA ~ 6.9X which is a 14.4% discount to its closest peer in the domestic market – Caltex (EV/EBITDA 7.81). This represents an attractive multiple and on listing Viva would be likely to trade at a similar valuation to Caltex.
FY19 P/E ratio 13.1X to 13.9X, ASX is currently 16.03X P/E.
Dividend yield is based on a 50% payout ratio, yielding 4.3%-4.6% fully franked, this represents more than 6% gross dividend yield with potential to increase.
Viva Energy will continue to own $646.4m of the ASX-listed Viva Energy REIT, yielding 6.4% cash per annum. 
Viva will list with net debt of $78m, which is very low and provides financial flexibility. This is set to reduce to $28.6mn by year end 2018 as $49.4m non-trade receivables will be settled. Low debt levels give management leeway for expansion, acquisitions, and growth of current retail/commercial businesses, further enhancing the attractive value proposition.
The strong net debt balance sheet position is supported by  a growing underlying EBITDA lifting from $535m in FY15 to $634m in FY17.
 The listing is expected to be completed on Friday July 13, 2018, the ticker will be VEA:asx and Saxo clients will be able to trade the shares or CFDs directly from their own accounts.

Enlarge
Source: Viva Energy IPO Prospectus

You can access both of our platforms from a single Saxo account.

Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)