Viva Energy Group Limited (VEA) - Upside surprise

Viva Energy Group Limited operates as an energy company in Australia, Singapore, and Papua New Guinea. The company operates through three segments: Convenience & Mobility, Commercial & Industrial, and Energy & Infrastructure. Viva Energy Group Limited was founded in 1901 and is based in Docklands, Australia.‍

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Viva Energy Group (VEA) flagged first-half CY26 operating earnings (EBITDA) would be 5–8% ahead of Ord Minnett and market expectations, driven by strong performance from its convenience and mobility (C&M) retail operations and its commercial and industrial (C&I) division, which benefitted from supply and hedging deals it had struck prior to the Middle East war. The strong result sent shares in the fuel marketer and refiner up almost 9% on the day. Guidance for its Geelong refinery fell short of consensus expectations, as the catalytic cracker outage hurt output and increased crude premiums in June squeezed refining margins – the Geelong refining margin (GRM) was US$21.10 a barrel (bbl) in the first half of CY26.

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That outcome was still more than double the US$8.20/bbl GRM on a year ago, and remain elevated relative to history, which Ord Minnett expects to continue driving upgrades to market earnings forecasts for Viva. In the C&I division, the drivers of the outperformance, i.e. the pre-war supply and hedging deals, will fade in the second half of CY26, and we expect second-half EBITDA will be similar to that in CY25 and in line with broader market expectations. For C&M, Viva has slowed the rollout of new OTR stores at its service station sites, a move Ord Minnett views as a sound decision given the weak sentiment among consumers currently amid inflation and high interest rates. Our forecast is for C&M EBITDA in the second half of CY26 to come in a little under guidance as fuel margins ease somewhat.

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Post the trading update, we have raised our EPS estimates by 25.1%, 0.6% and 0.3% for CY26, CY27 and CY28, respectively, leading us to increase our target price to $3.00 from $2.85.