Genesis Upgrades Guidance After Strong First Half; No Change to FVE

Narrow-moat Genesis Energy posted a strong first-half fiscal 2021 result, with EBITDA jumping 30% to NZD 217 million from the previous corresponding period, or pcp. The result was mainly driven by a good retail performance and unfavourable gas supply contracts rolling off. With a good first half in the bag and a favourable outlook, management upgraded full-year EBITDA guidance 4% to NZD 415 to 425 million. At the midpoint, this implies growth of 18% on last year, which was depressed by low rainfall and a planned shutdown of the Kupe oil and gas field. We upgrade our fiscal 2021 EBITDA forecast 4% to NZD 421 million but longer-term forecasts are intact. From fiscal 2020 to 2025, we forecast an EBITDA CAGR of 4.5%, which is largely unchanged. Further out, there are major earnings headwinds from depletion of Kupe, which currently contributes about a quarter of EBITDA. We maintain our NZD 2.40 fair value estimate and consider the stock overvalued.