ZEL - Z Energy.

**Beagle** · 25-11-2019, 12:17 PM

Originally Posted by couta1

Be Greedy when others are Fearful.

That famous saying of Warren Buffet is a good one for situations where there is genuine market panic and fear.
In my view that's not the case here. The market appears to be rationally marking the stock down steadily to reflect the declining fundamental's of the business and the extra regulatory risk. If they keep losing market share and retail margins are eroded further either through regulatory intervention or competitive pressure, then its likely to head materially lower. That's why I've referred to this one as a classic value trap. Its looks cheap, but the bitter taste of poor quality lingers long after the thrill of an apparent bargain.

**couta1** · 25-11-2019, 12:21 PM

Originally Posted by Beagle

That famous saying of Warren Buffet is a good one for situations where there is genuine market panic and fear.
In my view that's not the case here. The market appears to be rationally marking the stock down steadily to reflect the declining fundamental's of the business and the extra regulatory risk. If they keep losing market share and retail margins are eroded further either through regulatory intervention or competitive pressure, then its likely to head materially lower. That's why I've referred to this one as a classic value trap. Its looks cheap, but the bitter taste of poor quality lingers long after the thrill of an apparent bargain.

Just do it.

**Beagle** · 25-11-2019, 12:25 PM

Originally Posted by couta1

Just do it.

Who can forget the Prime Ministers recent outrage that motorists are being "fleeced" and we're going to do something about it !! (Don't forget its an election year next year so its all about being seen to do the right thing irrespective of whether motorists really are being fleeced or not).
5 December 2019, mark it down in your diary for the final fuel study release and the Government's response shortly thereafter.
A pretty obvious and significant headwind I would have thought...

**couta1** · 25-11-2019, 12:29 PM

Originally Posted by Beagle

I actually did take a decent punt this time last year (with no chart of FA support) and bought a decent stake at $5.20 and did well out of it.
My sense is the fundamental's have deteriorated quite significantly since then. To make another bold call like that I'd need to see the share price quite a bit south of where it is today.

And let's not forget who gave you the tip off at that point, remember the phone call.

**couta1** · 25-11-2019, 12:56 PM

Between $4.85 and $5 looks the likely trading range IMO.

**Beagle** · 25-11-2019, 02:52 PM

This is the problem that ZEL management appear to be in a "state of denial" about. Huge cumbersome organisation with thousands of staff that keeps adding to its costs when the market is saying they should do the exact opposite and streamline their head office costs down.

I know Kingfish used to have a shareholding and are known to often meet with the management of the companies they invest in. They got out last year.
The other thing that makes me wonder is overseas many fuel companies are investing in the roll out of fast charging stations to offset the decline in fuel volume through EV adoption.
It would be nice for EV owners to sip their coffee and nibble on their pies and snacks at a Z station while they wait for their cars to be charged up wouldn't it ?
You'd think ZEL would be proactive in this regard but obviously that's expecting too much of management who appear to be behind the ball, not trying to get ahead of it.

Industry standard leases that run for 15 years to align with fuel tank replacement cycles usually have annual or bi-annual ratchet clauses of the inflation rate or 2% per annum, whichever is the greater increase. This could eventually be very problematic for ZEL if fuel volumes and margins continue to decline year on year.