Performance of the recent biggest IPO in Australia – Viva Energy

Viva Energy Group Ltd (ASX: VEA), is a special purpose company in fuel refining and retailing segment, which has been associated with the acquisition of Shell Australia’s assets and has been slated as the biggest IPO in nearly four years to give Australia’s investment banking community some fuel to a significant float. The trading update is depicting that Viva Energy moved up about 1.458% on July 16, 2018, 11:30 am AEST.

The $2.65 billion raise, as flagged earlier suggested that the float window was open for big deals, including the delayed float of Latitude Financial. This four-year-old company has a collection of businesses including a retail business division which operates under several models, a property division, a commercial division along with their own individual drivers. This company is heavily reliant on supply agreement and a series of partnerships.

Viva Energy operates across three business segments, and generated Pro Forma Underlying EBITDA of $634.3 million in FY2017, and the three segments include retail, fuels and marketing, refining and supply, corporate and overheads. Senior Executive entered an escrow deed with Viva Energy, until the end of the prospectus forecast period (30 June 2019), wherein 50% of the shares were said to be escrowed, with the remaining 50% to be escrowed for an additional 12 months (i.e. until 30 June 2020).

With cash and cash equivalents of approximately $159.2 million and drawn down debt of approximately $237.2 million, Viva Energy had a pro forma net debt position of approximately $78.0 million as at 31 December 2017. With respect to the 12-month period to 30 June 2019, Directors target a dividend payout ratio of 60% of the Underlying NPAT for that period, the dividends in respect of that period are expected to be fully franked and the first of them is expected to be paid in April 2019; while no dividends were paid in respect of the six months ending 30 June 2018. Viva Energy had offered 959.6 million to 1,154.0 million Shares (being fully paid ordinary shares in Viva Energy) under the Offer and the Indicative Price Range for the Offer was $2.50 to $2.65 per Share.

In terms of business, Viva Energy markets refined products through a national network of over 1,100 Retail Sites. It manufactures refined product at its Geelong Refinery and supplies to wholesale and commercial customers. Particularly to the retail investors, it is the network that has been the key for the group and this network only will be crucial to the growth ambitions of CEO Scott Wyatt. People can expect Viva to continue to refine model for the local market, as the worldwide experience can help provide a guide to what is possible in Australia.

If Viva pushes consumers towards premium fuels it can benefit from the better fuel efficiency and can also play a role in the roll out of electric vehicles providing replacement fuel cells and charging stations. If Viva adopts to these sort of market changes they need to have the right retail sites at the right places. Viva Energy was trading at a market price of over $2.400 and a market capitalization of $ 4.67bn, and is expected to challenge players like Caltex given the strengths including the extensive network array.

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