Viva Energy's convenience store deal makes sense 'strategically' - analysts

Waypoint REIT

06/04/2023 03:54

(Updates with UBS comments, latest share moves)
    ** Shares of Viva Energy Group Ltd  VEA.AX  rose 3.2% on
Wednesday after the fuel supplier said it would pay A$1.15 bln
($772.69 mln) to acquire local convenience store chain On the
Run (OTR)
    ** Analysts at Jefferies say they like the "strategic
rationale" behind the deal as it provides company access to the
South Australian supply market and is expected to boost
commercial business
    ** Jefferies maintains rating and PT on stock as the deal
still needs the local competition regulator's approval, which
has historically been "challenging in this space"
    ** Brokerage also sees positive implications for peer Ampol
Ltd  ALD.AX  as the deal reduces risks of fuel price volatility
as Viva will be focussed on driving higher volumes than
discounting prices
    ** Deal makes sense "strategically" as it will grow Viva's
convenience business to over 700 stores, says brokerage
Morningstar
    ** UBS believes deal de-risks and improves potential upside
from the Coles Express acquisition
    ** Says if 150 Coles Express sites are transitioned to OTR
offering by 2026, expects an incremental EBITDA of A$64 mln from
the sites
        ** VEA shares up 0.3% at A$3.19; up 16.5% YTD, as of
last close


($1 = 1.4883 Australian dollars)

 (Reporting by Sameer Manekar and Rishav Chatterjee in
Bengaluru)
 ((Rishav.Chatterjee@thomsonreuters.com;))