Company Reports

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion liters, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavorable demand for the product mix. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

No-moat Ampol reported underlying first-half 2024 net profit after tax down 32% to AUD 207 million, well below our AUD 279 million forecast. The market wasn’t particularly impressed, with the shares down as much as 5% intraday. Ampol shares have fallen more than 25% since April 2024 peaks, and at around AUD 30.70 are undervalued in 4-star territory. Improvement in retail margins in response to an ongoing focus on marquee highway sites and unlocking food service potential are the likely catalysts for rerate to fair value.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion liters, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavorable demand for the product mix. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

No-moat Ampol guides to lower-than-expected unaudited first-half 2024 EBIT of AUD 500 million-AUD 510 million, down around 13% on the previous corresponding period. This is considerably lower than our expectations and we reduce our 2024 earnings per share forecast by 28% to AUD 2.70. This assumes AUD 506 million EBIT in the first half and AUD 638 million in the second.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion liters, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavorable demand for the product mix. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

We marginally raise our 2024 earnings per share forecast to AUD 3.74 with no-moat Ampol’s first-quarter 2024 trading result. However, our AUD 35 fair value estimate stands, with our midcycle estimates largely unchanged. The 2024 EPS forecast equates to a P/E of 10 at the current share price, and our AUD 2.25 dividend per share forecast translates to a healthy 6.0% fully franked yield. That doesn’t include the potential for another special eventually being declared—Ampol paid an AUD 0.60 per share special in 2023.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion liters, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavorable demand for the product mix. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

Our AUD 35 fair value estimate for no-moat Ampol stands. That’s despite Australia’s largest refined fuel retailer reporting lower-than-expected underlying 2023 net profit after tax, down 3% to AUD 289 million against our AUD 334 million target. We read no long-term implications. A better-than-expected performance from convenience retail was more than offset by a worse outcome from fuels and infrastructure, with lower margins featuring. We expect the latter to normalize over the next couple of years. Earnings declined at Lytton refinery and improvements at Z Energy in New Zealand were largely as expected.

Our AUD 35 fair value estimate for no-moat Ampol stands. Australia’s largest refined fuel retailer reported unaudited fourth-quarter 2023 underlying EBIT in the vicinity of AUD 340 million, down approximately 30% on the immediately preceding quarter. We talk only in approximates as Ampol didn’t provide a figure for the quarter, saying simply that 2023 full-year EBIT is anticipated to be slightly ahead of the record AUD 1.35 billion result delivered in 2022. We marginally increased our 2023 EPS forecast to AUD 3.34, based on a slightly stronger 2023 underlying EBIT estimate of AUD 1.40 billion.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion liters, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavorable demand for the product mix. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

We increase our fair value estimate for no-moat Ampol to AUD 35.00 from AUD 34.50 due to the time value of money. Australia’s largest refined fuel retailer reported strong third-quarter 2023 EBIT of AUD 438 million, up 65% on the previous corresponding period, or PCP. This is largely in line with our expectations and our 2023 EPS forecast of AUD 3.26 is little changed. Our AUD 2.14 DPS forecast is similarly little changed and equates to a healthy 6.7% fully franked yield at the current share price. We still assume a 60% payout for the second half, bringing the full-year payout to 66%.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion liters, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavorable demand for the product mix. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion litres, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavourable demand for the product mix. It was built to produce petrol, but the market has moved increasingly to diesel with advancing engine technology. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion litres, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavourable demand for the product mix. It was built to produce petrol, but the market has moved increasingly to diesel with advancing engine technology. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

Our AUD 27.00 fair value estimate for no-moat Ampol is unchanged. The company reported a 40% decline in underlying 2020 replacement cost net profit after tax, or NPAT, to AUD 207 million. This beat our AUD 186 million forecast by 11%, but we glean no material longer-term implications. The driver was largely lower-than-anticipated depreciation from the convenience retail segment. But a stronger-than-expected second-half turnaround from Lytton refinery also contributed.

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion litres, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavourable demand for the product mix. It was built to produce petrol, but the market has moved increasingly to diesel with advancing engine technology. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Ampol/Woolworths (ASX:WOW) sites.

Of the three Australasian refined fuel retailers we cover, New Zealand’s no-moat Z Energy is currently the cheapest at a price/fair value estimate of 0.43, followed by Australian players no-moat Viva Energy's 0.62 and no-moat Ampol Limited's (nee Caltex Limited) 0.90. Z Energy is rated 5-stars, Viva is 4-stars and Ampol 3-stars. Ampol was in 4-star territory until recently, its shares now up by approximately 45% from coronavirus lows. Viva was in the 5-star zone, but has risen by over 50% from March lows. Z Energy, however, remains in the doldrums in 5-star territory, its shares up only 12% from pandemic lows and wallowing.

We make no change to our AUD 34.00 fair value estimate for no-moat Caltex. The company reported first-quarter 2020 underlying EBIT of AUD 142 million, marginally ahead of the previous corresponding period’s AUD 138 million, but slightly below our expectations. We consequently reduce our 2020 EPS forecast by 9% to AUD 1.68, though much will rest on the pace at which the economy opens again in the wake of coronavirus.

We make no change to our AUD 34.00 fair value for no-moat Caltex. That’s despite the company reporting a 28% reduction in its February 2020 refiner margin versus January’s USD 5.78. The Singapore weighted average margin was lower chiefly on the back of soft global demand for gasoline and distillates due to coronavirus. However, the transition to new IMO 2020 fuel specifications further impacted refiner margins. Caltex says demand reductions due to coronavirus are further compounded by the current commitments made by OPEC and other oil producers to maintain current production levels.

Caltex owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion litres, about one third of company marketed volumes, when Kurnell closed. Kurnell refinery was shut in 2014 because of operational issues and unfavourable demand for the product mix. It was built to produce petrol, but the market has moved increasingly to diesel with advancing engine technology. Refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 2,000, including 350 jointly branded Caltex/Woolworths (ASX:WOW) sites.