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

Waypoint REIT

06/04/2023 06:37

(Adds comments from brokerages, updates share movement)
    ** 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)
        ** J.P. Morgan says rationale for deal appears to be
twofold: firstly, for Viva to diversify earnings away from fuel
sales to better position for energy transition, and secondly to
generate cost and revenue synergies, and thus the strategic
rationale "makes sense"
    ** 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"
    ** 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; expects an incremental
EBITDA of A$64 mln from 150 Coles Express sites if they are
transitioned to OTR offering by 2026
        ** Macquarie echoes sentiments of other analysts, saying
deal solves uncertainty around VEA’s rebranding exercise on its
existing Coles Express network
    ** VEA shares last down 0.3% at A$3.17; up 16.5% YTD as of
last close

($1 = 1.4883 Australian dollars)

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