Viva Energy Group Ltd

Cerutty Macro Fund continues to hold Viva Energy Group Ltd (VEA), viewing it as a value-oriented position with potential for upside as operational challenges are resolved. The fund notes that VEA is currently trading on a forward Price-to-Earnings ratio of approximately 11x, supported by a solid balance sheet. While recent issues—namely a compressor fault during scheduled maintenance—have posed short-term headwinds, Cerutty Macro Fund anticipates that the restoration of refining capacity in the latter part of calendar year 2023 could serve as a catalyst for a potential market re-rating. This outlook underpins the fund’s continued confidence in the company’s fundamentals and positioning.

L1 Capital Long Short Fund has updated its investment thesis on Viva Energy Group Ltd, following a strong share price performance driven by positive catalysts, including the company’s investor day in November and the ACCC’s decision not to oppose Viva’s acquisition of OTR Group. Viva is a leading fuel distributor with a diversified business model, including the Geelong Refinery, over 700 retail stores, and a significant commercial/industrial fuel business. L1 Capital Long Short Fund continues to hold Viva Energy because the acquisition of OTR Group is transformational, significantly expanding its Australian fuel and convenience store network to over 1,000 locations. This acquisition also shifts the business mix toward more defensive non-fuel earnings, which are expected to grow from around 30% to 50% of total revenue. The Fund is particularly optimistic about the company’s growth strategy, which targets doubling EBITDA to over $1,250 million in the next five years. Additionally, the realization of $60 million in annual synergies and material EPS accretion further strengthens the Fund’s conviction in Viva Energy’s long-term value creation.

L1 Capital Long Short Fund has updated its investment thesis on Viva Energy Group Ltd, maintaining its position despite recent share price weakness following the company’s 2024 results. While overall performance aligned with guidance, first half FY25 guidance for the Convenience & Mobility segment fell short of market expectations due to continued pressure on tobacco sales, sluggish convenience sales growth, and declining retail fuel margins. L1 Capital Long Short Fund continues to hold the position because it sees potential for a stronger second half, driven by the full acquisition of Liberty Convenience, integration synergies from the Coles Express and OTR businesses, and a $50 million cost-out program. Management has reiterated their $500 million EBITDA target for the Convenience & Mobility division—more than double the 2024 result—supported by the strong early performance of OTR conversions. In addition, the Commercial segment is performing well, and refining margins are improving off a low base. L1 Capital Long Short Fund notes that Viva Energy continues to trade at a significant discount to global peers, despite what it views as meaningful medium-term earnings upside.