ZEL - Z Energy.

[Joshuatree]

651,000 sharers thru today s/p $4.16. Was checking the depth yest and saw re 6000 shares out on their own @ $4.20. They got snaffled so looks like a keen buyer hoovering up all shares offered. May be offering a few myself in the next few days

[bunter]

I've been wondering why all the interest. Time for a 'please explain' notice?
Worth 5.50 by my model, but the share price seems to be saying some good news is coming.

[Harvey Specter]

I've been wondering why all the interest. Time for a 'please explain' notice?
Worth 5.50 by my model, but the share price seems to be saying some good news is coming.

I think it has just been the shift to defensive yield stocks that has benefited Z.

I sold out recently thinking it would track sideways as I didn't pick the shift from growth to yield stocks. Still invested via IFT and I have plenty of power stocks so haven't missed the shift completely.

[Harvey Specter]

I've been wondering why all the interest. Time for a 'please explain' notice?
Worth 5.50 by my model, but the share price seems to be saying some good news is coming.

I think it has just been the shift to defensive yield stocks that has benefited Z.

I sold out recently thinking it would track sideways as I didn't pick the shift from growth to yield stocks. Still invested via IFT and I have plenty of power stocks so haven't missed the shift completely.

[Joshuatree]

I've been wondering why all the interest. Time for a 'please explain' notice?
Worth 5.50 by my model, but the share price seems to be saying some good news is coming.

I like your model bunter. Craigs have changed from a hold to a buy with 1 year target of $4.64(was $4.11) and net yield steadily increasing from 5.8% now to 7.6% in 2017.

Am watching CTX Z's equivalent in Aus (transforming out of refining to straight retailer)as well.

[bunter]

Puzzled to see ZEL's share price weakness. Oil has gone up a bit, but...

- It stands to receive a fully imputed div from NZR for FY15 worth 5c per Z share , plus approx 15cps (unrealisable) capital gain on NZR's share price rise since ZEL's last report. Might as well pass the full 5c div on to its shareholders, with IC, IYAM (special div?)
- It's getting a refund of 2014's 'floor' payment from NZR.
- Its core business must have had a good six months - add another 2-3 c to that final div.

So... last year - 20.3c FI div
2015 - say - 28c FI - for a gross yield on current SP of 4.66 of 8.34%

[Joshuatree]

Been a fab run up to $5 bunter , maybe some profit taking from there.. Also caltex unlagged margins dropping.

[Beagle]

If oil prices rise I think the market is concerned Z won't be able to achieve the extra margin's its been able to extract from its customers.

[bunter]

Agree Roger, JT.

Another NZR-related benefit, apart from the NZR div and NZR capital gain, is the refining margin cap.

Currently the cap is in place - actual refining margin $10, cap $9.

Presumably this $1 per barrel benefit flows to Z, BP Caltex etc.

Next year, with TMH online, if all goes well, today's $1 margin will be worth $2.16.
Higher margins are possible.

My calcs say that's worth approx 1.6c per Z share per dollar the refining margin is above the cap.

[bunter]

Some analysis on Z looking at the effect on Z of forecast improvement in NZR performance for 2014, 2015 and maybe beyond.

My valuation goes from $5.66 to $6.37, assuming the NZR benefit to be non-recurring.

So a moderate benefit, and not a better way to get exposure to NZR than buying NZR.

FB figures here

8/02/15			gf	8.0%		ZEL
SP	4.620		SOI	400
	14 e	15	16	17	18	19	20	21
NPAT ul - excl NZR	119	128	139	150	162	175	189	204
NPAT ul - from NZR	0	23	34	28	22	22	22	22
Total NPAT ul	119	151	172	178	184	197	211	226
eps ul	0.297	0.378	0.431	0.444	0.460	0.492	0.526	0.564
payout %	80%	83%	84%	83%	82%	82%	82%	82%
GDPS - excl NZR	0.329	0.356	0.384	0.415	0.448	0.484	0.522	0.564
GDPS - from NZR	0.000	0.080	0.118	0.097	0.077	0.077	0.076	0.076		0.433
GDPS - total	0.329	0.436	0.502	0.512	0.525	0.560	0.599	0.640
gy%	7.1%	9.4%	10.9%	11.1%	11.4%	12.1%	13.0%	13.9%
Valuations
Graham 14	7.28
Div flow	7.05
Div flow exc NZR	6.07
NPV of NZR benefit approx	0.3
Div flow exc NZR + NPV NZR div	6.37
RC operating EBITDAF
https://www.nzx.com/files/attachments/203281.pdf - p16		Z's preferred measure of profit. HC = historic cost of fuel; RC = replacement cost
NPAT-ul
Z forecast RCEBITDAF 15 220-240m (say 240)	240
DA*	41
I*	34
RCEBT	165
T	46.2
underlying NPAT	118.8
ul eps	0.2970
* 14H1*2
ZEL's NZR shareholding
Z's NZR shares m	48
total NZR shares m	313
Z's %	15.4%
ZEL's NZR dividend (all figures net)	14	15	16	17	18	19	20	21
NZR div cps	0	0.345	0.414	0.439	0.463	0.461	0.459	0.457
to Z $m	0	17	20	21	22	22	22	22
to Z cps	0	0.041	0.050	0.053	0.056	0.055	0.055	0.055
Z's processing fee cap benefit	14	15	16	17	18	19	20	21
margin est	0	10	11	10	9	8	7	6
Cap surplus	0	1	2	1	0	0	0	0
BBPA	42.6	42.6	45.6	45.6	45.6	45.6	45.6	45.6
Cap effect $m	0	42.6	91.2	45.6	0	0	0	0
to Z $m	0	6.54	14.00	7.00	0.00	0.00	0.00	0.00
to Z cps	0	0.016	0.035	0.018	-	-	-	-
NZR SP change	0.92
in $m	44
cps Z	0.110