ZEL - Z Energy.

[winner69]

Interesting insight into the state of the economy. Maybe all those pessimistic ANZ reports were right ?
http://www.sharechat.co.nz/article/5...ing-sectorhtml
Extract for the time poor amongst us "Z Energy chief executive Mike Bennetts said the company is seeing a slowdown across the country"
and this... Bennetts said the economy was the weakest he had seen it in the past 10 years. Even jet fuel volumes, which had been growing at double-digit rates, were flat in the past six months..
So the economy is slow and their margins are under very intense pressure that's likely to increase as minnows expand more and we have the Govt about to release their fuel study report next month so there's regulatory risk as well. What a "compelling" investment proposition this one is ! (Sarcasm intended in case its not perfectly obvious to )

He’s pretty miserable these days that Bennetts guy ...probably making a lot of it up to say it’s not all his fault

But a bit ominious when says -

A 5 cent-a-litre reduction in margins would have taken “hundreds of millions of profitability” out of the sector in the past six months, and that had to have an impact, he said.

Bennetts said Z has the balance sheet to see it through


Maybe he wants to be the last man standing or something

[ananda77]

Recommendation impact (last updated: 31/10/2019)

Event analysis
No-Moat Z Energy Stumbles in Heavy First-Half Retail Competition. No Change to NZD 8.30 FVE.

Our NZD 8.30 fair value for no-moat Z Energy stands. Z shares are 40% below all time NZD 8.50 highs in 2016 and materially undervalued. Demonstrable stabilisation to both regional refiner and retail margins is the likely catalyst to a share price re-rate. The first plank might already be underway with September quarter refiner margin back above USD 7.00 per barrel from USD 5.00 in the June quarter.

We continue to see limited long-term implication in current weaker earnings, reflecting unsustainable Retail price competition and fuel discounting, exacerbated by cyclically low regional refiner margins. These are the same elements detracting from the current earnings of Australian counterparts. We think these metrics will favourably trend nearer to longer-term averages and Z's infrastructure advantage should see it weather the current storm as well as any.

The company reported a 29% decline in first-half fiscal 2020 adjusted replacement cost NPAT to NZD 44 million. Intense retail fuels competition adversely impacted trading. We exclude an NZD 35 million pretax impairment to the Flick Electric investment which lost customers due to high spot prices. Regardless, the overall result was below our expectations and we downgrade our fiscal 2020 adjusted replacement cost NPAT forecast by 20% to NZD 148 million. That said, a material portion of the downgrade reflects higher depreciation and interest after the new accounting standard bringing operating leases on balance sheet.

Despite a poor first half, Z reaffirmed full-year fiscal 2020 earnings guidance for EBITDAF of NZD 390-430 million with dividends to be in a range of NZD 48 to 50 cents per share. The company qualified the bottom of the range indicates no change in Retail margins from the August to October actuals, with the midpoint dependent on an improvement on recent months. We marginally reduce our fiscal 2020 EBITDA forecast to a guidance lower-end NZD 400 million from our prior NZD 410 million estimate.

[Beagle]

Recommendation impact (last updated: 31/10/2019)

Event analysis
No-Moat Z Energy Stumbles in Heavy First-Half Retail Competition. No Change to NZD 8.30 FVE.

Our NZD 8.30 fair value for no-moat Z Energy stands. Z shares are 40% below all time NZD 8.50 highs in 2016 and materially undervalued. Demonstrable stabilisation to both regional refiner and retail margins is the likely catalyst to a share price re-rate. The first plank might already be underway with September quarter refiner margin back above USD 7.00 per barrel from USD 5.00 in the June quarter.

We continue to see limited long-term implication in current weaker earnings, reflecting unsustainable Retail price competition and fuel discounting, exacerbated by cyclically low regional refiner margins. These are the same elements detracting from the current earnings of Australian counterparts. We think these metrics will favourably trend nearer to longer-term averages and Z's infrastructure advantage should see it weather the current storm as well as any.

The company reported a 29% decline in first-half fiscal 2020 adjusted replacement cost NPAT to NZD 44 million. Intense retail fuels competition adversely impacted trading. We exclude an NZD 35 million pretax impairment to the Flick Electric investment which lost customers due to high spot prices. Regardless, the overall result was below our expectations and we downgrade our fiscal 2020 adjusted replacement cost NPAT forecast by 20% to NZD 148 million. That said, a material portion of the downgrade reflects higher depreciation and interest after the new accounting standard bringing operating leases on balance sheet.

Despite a poor first half, Z reaffirmed full-year fiscal 2020 earnings guidance for EBITDAF of NZD 390-430 million with dividends to be in a range of NZD 48 to 50 cents per share. The company qualified the bottom of the range indicates no change in Retail margins from the August to October actuals, with the midpoint dependent on an improvement on recent months. We marginally reduce our fiscal 2020 EBITDA forecast to a guidance lower-end NZD 400 million from our prior NZD 410 million estimate.

Sept quarter recovery in margin is already included in their half year results. Who knows where refinery margins head but we do know they are very volatile and cyclical. NZR a pure cyclical. So we're basically right at the bottom of the guidance range already provided there's no further decline in retail margins. Hmmm...In other words, quite vulnerable to another downgrade and the dividend is also therefore quite vulnerable. How they get to $8.30 as fair value ??????...my goodness, that's anyone's guess and they're well and truly out on a limb up there as can be graphically seen here https://www.marketscreener.com/Z-ENE...098/consensus/

[Jim]

The commerce watchdog is waving the big stick on early December and I think the share price will declined further. Plus the minnows slowly taking the market shares

[Beagle]

The commerce watchdog is waving the big stick on early December and I think the share price will declined further. Plus the minnows slowly taking the market shares

With their recent quite dramatic slide in the polls I predict Labour will be exceptionally keen to make political capital out of this fuel study in an election year and try and find some way to further intensify pressure on the retail margin, wholesale contracts or jet fuel supply contracts or all three.
The irony of them being highly likely to do this when margins and return on invested capital are probably at their lowest level in many years isn't lost on me.
Being a shareholder at present just looks too tough to me.

[winner69]

A stuffed economy and those horrible competitors undercutting them given the blame for not so good performance .......

......but you have to get a bit concerned with a 17% increase in employee costs and more rhan doubling of marketing costs.

[Beagle]

"Guidance retained at $390-430m of RC EBITDAF and fully imputed dividend of 48-50 cents per share •If Retail margins do not change from the August to October actuals, then this would indicate the bottom of the range, with the mid point dependent on an improvement on recent months"

So they're right at the bottom of the range and say in their presentation that its " Very difficult to accurately assess the margin outlook for Retail" for the second half.
Retail margin compression responsible for 65% of the most recent downgrade and most of the rest was lack of volume

Not a downgrade per se, but this is as close as I have ever seen a company go in terms of living within the previous forecast without actually issuing a downgrade. Quite obviously they are very clearly telegraphing the very real possibility of another profit downgrade.

The wages cost increase Winner because of bonus accrual's from last year. Just as well they are doing so well that they can afford such massive bonus's eh

[winner69]

"Guidance retained at $390-430m of RC EBITDAF and fully imputed dividend of 48-50 cents per share •If Retail margins do not change from the August to October actuals, then this would indicate the bottom of the range, with the mid point dependent on an improvement on recent months"

So they're right at the bottom of the range and say in their presentation that its " Very difficult to accurately assess the margin outlook for Retail" for the second half.
Retail margin compression responsible for 65% of the most recent downgrade and most of the rest was lack of volume

Not a downgrade per se, but this is as close as I have ever seen a company go in terms of living within the previous forecast without actually issuing a downgrade. Quite obviously they are very clearly telegraphing the very real possibility of another profit downgrade.

The wages cost increase Winner because of bonus accrual's from last year. Just as well they are doing so well that they can afford such massive bonus's eh

Thanks for pointing out the bonuses ...so greater bonuses this year ...cool

Best part of $10m to launch Pumped Stacking ...expensive these programs but need to confuse punters somehow and con them into thinking they’re getting a good price

[Beagle]

That's a lot to lauch pumped isn't it ! They really must be desperate to try and stem the flow of losing market share !
Local Gull is $2.149, was put up 6 cents when the Saudi's oil infrastructure was attacked and has never come down despite the rise in the $Kiwi and fall in the oil price.
Local Caltex is $2.189 less 10 cents off on pumped days = $2.089 plus airpoints or fly buys and canny punters can stack the discounts to effectively get fuel for less.
Who's really ripping us off ? Gull owned by Caltex Australia...Hmmm

[winner69]

Filled up at Waitomo today at 207.9 .....Passed Z Newtown on way home 232.9


Hmmm