Viva Energy’s result was in line with recently downgraded guidance, although overall quality was better than expected, the broker notes. An announced $680m off-market buyback is a clear positive. The broker suspects earnings may have bottomed.
Viva’s is by nature a volatile business, the broker points out, hence a PE discount to market, but the broker sees the 2-3 year earnings outlook as likely to improve given reinvestment in retail and weak margins being cycled in refining. Buy retained, target rises to $2.40 from $2.25.
Target price is $2.40.Current Price is $1.91. Difference: $0.49 – (brackets indicate current price is over target). If VEA meets the UBS target it will return approximately 20% (excluding dividends, fees and charges – negative figures indicate an expected loss).