The September quarter update was largely in line with Credit Suisse forecasts. The sustainability of the refinery is a large issue that the broker believes is not sufficiently embedded in investor thinking.
Meanwhile, retail volumes were flat outside of Victoria. In commercial segments, a -76% decline in aviation volume was unchanged. The refining loss of -$30m was marginally better than the broker had expected.
Credit Suisse assesses current refining capacity withdrawals are insufficient to correct the global oversupply. Therefore, there is an increasing likelihood the refining will be negative in terms of cash flow in 2021. Neutral rating retained. Target inches up to $1.78 from $1.77.
Target price is $1.78.Current Price is $1.43. Difference: $0.35 – (brackets indicate current price is over target). If VEA meets the Credit Suisse target it will return approximately 20% (excluding dividends, fees and charges – negative figures indicate an expected loss).