Ampol Shares Fall over 4% as Company Eyes 49% Stake Sale in Convenience Stores Property Trust

Ampol Ltd, formerly known as Caltex Australia, said it would sell a 49% stake in the property trust for A$682 million that owns convenience retail sites, sending its shares down over 4% to AU$28.61 on Monday.

Australia’s largest publicly listed refiner said the deal values the entire property trust at AU$1.4 billion and the minority stake was in a newly formed property trust which would own more than 200 convenience retail sites throughout the country, Reuters reported.

However, the petrol company said it would retain a majority, 51%, stake in the convenience retail sites, maintaining operational and strategic control.

“Following the completion of our retail network review in 2019, we identified the opportunity to unlock the value of our high-quality retail property assets through a transaction that would demonstrate value, whilst importantly allowing Ampol to retain strategic and operational control over our core convenience retail network.” Ampol CEO Matt Haliday said in a statement.

Ampol said in the first year it would pay A$77 million in rental to the property trust and it is planning to utilize AU$612 million from the deal to cut its debt amid global uncertainty in the time of the coronavirus pandemic.

At the time of writing, Ampol shares traded 3.99% lower at AU$28.65 on Monday. The stock is up over 15% so far this year.

Ampol stock forecast

Morgan Stanley target price is AU$30.7 with a high of AU$41.7 under a bull scenario and AU$18 under the worst-case scenario. MarketGrader rated Ampol Limited SELL, based on an overall grade of 42.60 (out of 100) and said the company’s growth record is very poor across its top and bottom lines, suggesting it may need to consider strategic initiative. However, MarketGrader said the company’s shares look attractive relative to the stock’s current fundamentals.

The one listed on the U.S. stock exchange, three analysts forecast the average price in 12 months at $21.21 with a high forecast of $22.19 and a low forecast of $20.08. The average price target represents a 76.75% increase from the last price of $12.00. From those three, two analysts rated ‘Buy’, one rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Analyst view

“Ampol had a volatile 2019 in terms of stock performance, which has continued into early 2020 as a result of the oil and energy stock market sell-off given the risks arising from COVID-19. We see a turnaround from Q2 as retail margins improve,” said Adam Martin equity analyst at Morgan Stanley.

“Other considerations include: the effectiveness of Ampol’s operational and capital initiatives in response to weak economic demand from COVID-19; whether the favourable retail margins will continue and offset volume declines; evidence of continued improvement in its retail division; and as with Viva, a better refining outlook.”

Upside and Downside risks

Upside: 1) Higher refiner margins. 2) Higher retail fuel margins. 3) Delivery on cost-out and property. 4) Buybacks or capital management. 5) Stronger USD highlighted by Morgan Stanley.

Downside: 1) Lower retail fuel margins. 2) Lower commercial profits. 3) Softening fuel volumes.