ZEL - Z Energy.

[winner69]

Interesting insight into the state of the economy. Maybe all those pessimistic ANZ reports were right ?
http://www.sharechat.co.nz/article/58f89d73/z-energy-says-economy-wide-slowdown-hurting-sector.html?utm_medium=email&utm_campaign=Z%20Energy%20says%20economy-wide%20slowdown%20hurting%20sector&utm_content=Z%20Energy%20says%20economy-wide%20slowdown%20hurting%20sector+CID_343eeae197a 21a9f75e842d9e94b2dc8&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle58f89d73z-energy-says-economy-wide-slowdown-hurting-sectorhtml
Extract for the time poor amongst us "Z Energy chief executive Mike Bennetts said the company is seeing a slowdown across the country"
and this... Bennetts said the economy was the weakest he had seen it in the past 10 years. Even jet fuel volumes, which had been growing at double-digit rates, were flat in the past six months..
So the economy is slow and their margins are under very intense pressure that's likely to increase as minnows expand more and we have the Govt about to release their fuel study report next month so there's regulatory risk as well. What a "compelling" investment proposition this one is ! (Sarcasm intended in case its not perfectly obvious to )

He’s pretty miserable these days that Bennetts guy ...probably making a lot of it up to say it’s not all his fault

But a bit ominious when says -

A 5 cent-a-litre reduction in margins would have taken “hundreds of millions of profitability” out of the sector in the past six months, and that had to have an impact, he said.

Bennetts said Z has the balance sheet to see it through


Maybe he wants to be the last man standing or something

[ananda77]

Recommendation impact (last updated: 31/10/2019)

Event analysis
No-Moat Z Energy Stumbles in Heavy First-Half Retail Competition. No Change to NZD 8.30 FVE.

Our NZD 8.30 fair value for no-moat Z Energy stands. Z shares are 40% below all time NZD 8.50 highs in 2016 and materially undervalued. Demonstrable stabilisation to both regional refiner and retail margins is the likely catalyst to a share price re-rate. The first plank might already be underway with September quarter refiner margin back above USD 7.00 per barrel from USD 5.00 in the June quarter.

We continue to see limited long-term implication in current weaker earnings, reflecting unsustainable Retail price competition and fuel discounting, exacerbated by cyclically low regional refiner margins. These are the same elements detracting from the current earnings of Australian counterparts. We think these metrics will favourably trend nearer to longer-term averages and Z's infrastructure advantage should see it weather the current storm as well as any.

The company reported a 29% decline in first-half fiscal 2020 adjusted replacement cost NPAT to NZD 44 million. Intense retail fuels competition adversely impacted trading. We exclude an NZD 35 million pretax impairment to the Flick Electric investment which lost customers due to high spot prices. Regardless, the overall result was below our expectations and we downgrade our fiscal 2020 adjusted replacement cost NPAT forecast by 20% to NZD 148 million. That said, a material portion of the downgrade reflects higher depreciation and interest after the new accounting standard bringing operating leases on balance sheet.

Despite a poor first half, Z reaffirmed full-year fiscal 2020 earnings guidance for EBITDAF of NZD 390-430 million with dividends to be in a range of NZD 48 to 50 cents per share. The company qualified the bottom of the range indicates no change in Retail margins from the August to October actuals, with the midpoint dependent on an improvement on recent months. We marginally reduce our fiscal 2020 EBITDA forecast to a guidance lower-end NZD 400 million from our prior NZD 410 million estimate.

[Beagle]

Recommendation impact (last updated: 31/10/2019)

Event analysis
No-Moat Z Energy Stumbles in Heavy First-Half Retail Competition. No Change to NZD 8.30 FVE.

Our NZD 8.30 fair value for no-moat Z Energy stands. Z shares are 40% below all time NZD 8.50 highs in 2016 and materially undervalued. Demonstrable stabilisation to both regional refiner and retail margins is the likely catalyst to a share price re-rate. The first plank might already be underway with September quarter refiner margin back above USD 7.00 per barrel from USD 5.00 in the June quarter.

We continue to see limited long-term implication in current weaker earnings, reflecting unsustainable Retail price competition and fuel discounting, exacerbated by cyclically low regional refiner margins. These are the same elements detracting from the current earnings of Australian counterparts. We think these metrics will favourably trend nearer to longer-term averages and Z's infrastructure advantage should see it weather the current storm as well as any.

The company reported a 29% decline in first-half fiscal 2020 adjusted replacement cost NPAT to NZD 44 million. Intense retail fuels competition adversely impacted trading. We exclude an NZD 35 million pretax impairment to the Flick Electric investment which lost customers due to high spot prices. Regardless, the overall result was below our expectations and we downgrade our fiscal 2020 adjusted replacement cost NPAT forecast by 20% to NZD 148 million. That said, a material portion of the downgrade reflects higher depreciation and interest after the new accounting standard bringing operating leases on balance sheet.

Despite a poor first half, Z reaffirmed full-year fiscal 2020 earnings guidance for EBITDAF of NZD 390-430 million with dividends to be in a range of NZD 48 to 50 cents per share. The company qualified the bottom of the range indicates no change in Retail margins from the August to October actuals, with the midpoint dependent on an improvement on recent months. We marginally reduce our fiscal 2020 EBITDA forecast to a guidance lower-end NZD 400 million from our prior NZD 410 million estimate.

Sept quarter recovery in margin is already included in their half year results. Who knows where refinery margins head but we do know they are very volatile and cyclical. NZR a pure cyclical. So we're basically right at the bottom of the guidance range already provided there's no further decline in retail margins. Hmmm...In other words, quite vulnerable to another downgrade and the dividend is also therefore quite vulnerable. How they get to $8.30 as fair value ??????...my goodness, that's anyone's guess and they're well and truly out on a limb up there as can be graphically seen here https://www.marketscreener.com/Z-ENERGY-LTD-14473098/consensus/

[Jim]

The commerce watchdog is waving the big stick on early December and I think the share price will declined further. Plus the minnows slowly taking the market shares

[Beagle]

The commerce watchdog is waving the big stick on early December and I think the share price will declined further. Plus the minnows slowly taking the market shares

With their recent quite dramatic slide in the polls I predict Labour will be exceptionally keen to make political capital out of this fuel study in an election year and try and find some way to further intensify pressure on the retail margin, wholesale contracts or jet fuel supply contracts or all three.
The irony of them being highly likely to do this when margins and return on invested capital are probably at their lowest level in many years isn't lost on me.
Being a shareholder at present just looks too tough to me.

[winner69]

A stuffed economy and those horrible competitors undercutting them given the blame for not so good performance .......

......but you have to get a bit concerned with a 17% increase in employee costs and more rhan doubling of marketing costs.

[Beagle]

"Guidance retained at $390-430m of RC EBITDAF and fully imputed dividend of 48-50 cents per share •If Retail margins do not change from the August to October actuals, then this would indicate the bottom of the range, with the mid point dependent on an improvement on recent months"

So they're right at the bottom of the range and say in their presentation that its " Very difficult to accurately assess the margin outlook for Retail" for the second half.
Retail margin compression responsible for 65% of the most recent downgrade and most of the rest was lack of volume :eek2:

Not a downgrade per se, but this is as close as I have ever seen a company go in terms of living within the previous forecast without actually issuing a downgrade. Quite obviously they are very clearly telegraphing the very real possibility of another profit downgrade.

The wages cost increase Winner because of bonus accrual's from last year. Just as well they are doing so well that they can afford such massive bonus's eh :confused:

[winner69]

"Guidance retained at $390-430m of RC EBITDAF and fully imputed dividend of 48-50 cents per share •If Retail margins do not change from the August to October actuals, then this would indicate the bottom of the range, with the mid point dependent on an improvement on recent months"

So they're right at the bottom of the range and say in their presentation that its " Very difficult to accurately assess the margin outlook for Retail" for the second half.
Retail margin compression responsible for 65% of the most recent downgrade and most of the rest was lack of volume :eek2:

Not a downgrade per se, but this is as close as I have ever seen a company go in terms of living within the previous forecast without actually issuing a downgrade. Quite obviously they are very clearly telegraphing the very real possibility of another profit downgrade.

The wages cost increase Winner because of bonus accrual's from last year. Just as well they are doing so well that they can afford such massive bonus's eh :confused:

Thanks for pointing out the bonuses ...so greater bonuses this year ...cool

Best part of $10m to launch Pumped Stacking ...expensive these programs but need to confuse punters somehow and con them into thinking they’re getting a good price

[Beagle]

That's a lot to lauch pumped isn't it ! They really must be desperate to try and stem the flow of losing market share !
Local Gull is $2.149, was put up 6 cents when the Saudi's oil infrastructure was attacked and has never come down despite the rise in the $Kiwi and fall in the oil price.
Local Caltex is $2.189 less 10 cents off on pumped days = $2.089 plus airpoints or fly buys and canny punters can stack the discounts to effectively get fuel for less.
Who's really ripping us off ? Gull owned by Caltex Australia...Hmmm

[winner69]

Filled up at Waitomo today at 207.9 .....Passed Z Newtown on way home 232.9


Hmmm

[kiwico]

Filled up at Waitomo today at 207.9 .....Passed Z Newtown on way home 232.9

That's what is really interesting about fuel prices in Wellington at the moment. The Johnsonville major fuel retailers held off for a while when the new Waitomo opened up close by. A neighbour who works for one of them told me they would all shortly reduce their prices and he was right, but a few kms away in Tawa and Porirua there is the same price gap you refer to.

[horus1]

Will never go back to Z Use Waitomo all the time

[Beagle]

Funnily enough I drove past a Waitomo today on my travels to Waiuku and a number of Gulls as well.
Waitomo $2.17.9, no discount of any kind, Gull's varied between $2.14.9 and $2.19.9, again no discounts.
My usual Caltex is $2.18.9 and I usually fill up on super pumped days for 10 cents off = $2.08.9.
I guess everyone will have a different anecdotal story but lets not pretend the minnows are always cheaper.

[winner69]

Funnily enough I drove past a Waitomo today on my travels to Waiuku and a number of Gulls as well.
Waitomo $2.17.9, no discount of any kind, Gull's varied between $2.14.9 and $2.19.9, again no discounts.
My usual Caltex is $2.18.9 and I usually fill up on super pumped days for 10 cents off = $2.08.9.
I guess everyone will have a different anecdotal story but lets not pretend the minnows are always cheaper.

Waitomo need to collect your regional fuel tax in Auckland ---- Z and others collect the required amount from across the country (mainly Wellington they say) As long as JAcinda gets her 10 cents from whats sold in Auckland she doesn't really care where the cash comes from (like whose subsidising Aucklanders).

[Jay]

Around my way (in Auckland) prices are around 2.24-2.28, with Caltex usually the cheapest (and closest) before any discounts. Though filled up at Lunn avenue BP yesterday as had 11 cents off via AA smartfuel, they were 2 cents more than Caltex but only 6 cents off there (needed to fill up could not wait for another 10 cents off day)

[couta1]

BP got the monopoly on 98 octane, paid $2.44 with discount the other day, no competition in most places so they can keep the price cranked up.

[Beagle]

Hope your new 800 horsepower Shelby Mustang runs of 95 Octane :) https://www.autocar.co.nz/autocar-news-app/shelby-officially-coming-to-new-zealand

That 600kw one is you mate, go hard or go home :D

[Grimy]

And now we have Share Tank...…...Pre-Buy your Z petrol.

[Beagle]

That'll keep the kuzzies happy eh https://sharetank.co.nz/

[peat]

That'll keep the kuzzies happy eh https://sharetank.co.nz/

its like futures in your fuel tank!

[cyclist]

This part is interesting for those who live in areas with high prices:

"Share everywhere, use anywhere. Fill your Sharetank in Tauranga. Share it with Gran in Timaru. Add pre-paid litres in Cambridge. Fill up in Christchurch."

Geographical arbitrage ...

[Beagle]

This part is interesting for those who live in areas with high prices:

"Share everywhere, use anywhere. Fill your Sharetank in Tauranga. Share it with Gran in Timaru. Add pre-paid litres in Cambridge. Fill up in Christchurch."

Geographical arbitrage ...

Forgive me asking the obvious but does that in some way allow someone to get around Auckland's highway robbery fuel tax ?

[iceman]

Forgive me asking the obvious but does that in some way allow someone to get around Auckland's highway robbery fuel tax ?

Exactly what I was thinking Beagle. Looks like it does and shows once again that people will always find ways to avoid silly taxes !

[Beagle]

Exactly what I was thinking Beagle. Looks like it does and shows once again that people will always find ways to avoid silly taxes !

Not too subtle payback / preemptive strike against regulators for the perceived injustice of the fuel price study ? ZEL skating on thin ice with the regulators with this app in my opinion.

[Onion]

Forgive me asking the obvious but does that in some way allow someone to get around Auckland's highway robbery fuel tax ?

http://help.sharetank.co.nz/en/articles/3339706-do-fuel-taxes-levies-apply-to-sharetank


Fuel prices in NZ contain several taxes and levies. When you fill up at a Z station, these are included in the pump price. Because Sharetank searches for the lowest Z pump price within a 30km radius, fuel taxes and levies—where applicable—are included when you top-up. There’s no need to pay anything extra when you redeem your Sharetank litres.

So if the top-up location is within the Auckland fuel-tax area then presumably the tax is paid even if the fuel is redeemed elsewhere!

... but does seem to be a way to avoid the tax by using the reverse strategy.

[winner69]

http://help.sharetank.co.nz/en/articles/3339706-do-fuel-taxes-levies-apply-to-sharetank



So if the top-up location is within the Auckland fuel-tax area then presumably the tax is paid even if the fuel is redeemed elsewhere!

... but does seem to be a way to avoid the tax by using the reverse strategy.

But if you ‘top up’ in Wellington (and other places) then you’ll be paying most of the levy anyway

But then again somebody told me the levy is calculated on deliveries to the outlet anyway

[peat]

Petrol is pretty cheap here in Whanganui in a regular basis
Z here today $2.04

Not sure that it would be worth the hassle of sharktanking for mates even if they were in Auckland though?

[Beagle]

We need to develop our own sharetrader/sharetanking app to make it easy :D

[RTM]

Petrol is pretty cheap here in Whanganui in a regular basis
Z here today $2.04

Not sure that it would be worth the hassle of sharktanking for mates even if they were in Auckland though?

Long way to drive to top up Peat.

[peat]

Long way to drive to top up Peat.

but um yeh the shared tank thing is why I comment.
I'm going to investigate coz my mate has a rotor and you know what they're like for fuel.

[winner69]

That Sharetank thing

We’ll be a starter as nearest / usual Z’s are always most expensive in town.

Today cheapest within 30km is 212.9 and local is 235.9 ....23 cent difference.

Makes you wonder if this fantastic scheme is a race to the bottom ..or something like that.

[RTM]

but um yeh the shared tank thing is why I comment.
I'm going to investigate coz my mate has a rotor and you know what they're like for fuel.

Ah...missed that. As we don’t have a Z handy up here I don’t really pay attention at all.

[Beagle]

That Sharetank thing

We’ll be a starter as nearest / usual Z’s are always most expensive in town.

Today cheapest within 30km is 212.9 and local is 235.9 ....23 cent difference.

Makes you wonder if this fantastic scheme is a race to the bottom ..or something like that.

Already they are right at the bottom of their forecast range and this assumes the same level of competitive discounting for the rest of the year as experienced in the first half.
My sense here is this moves the discounting model even further. Shooting themselves in the foot ?

[Airw0lf]

That Sharetank thing

We’ll be a starter as nearest / usual Z’s are always most expensive in town.

Today cheapest within 30km is 212.9 and local is 235.9 ....23 cent difference.

Makes you wonder if this fantastic scheme is a race to the bottom ..or something like that.

It probably will build loyalty towards Z though, even among some people who like to shop around for the lowest prices (I.e., they might stay with Z on sharetank rather than physically driving to a Gull in their area that is a few cents cheaper than the cheapest Z offer on sharetank.) It also is marketed at small businesses and families who can hedge their fuel bills - not so much to pick the fuel price but to help with monthly budgeting and so forth.

[ananda77]

mmmh, this sharetank app is good as far as can make out so far. Z scans the cheapest available offer of 95, which is right now 2.359. Taking 10c discount off = 2.259. Cheapest Gull in my area is 2.30 for 98 (which I prefer; but maybe does not make much difference and is more psych stuff).
Looks promising and would make Z competitive, cheaper than Gull

...like trading fuel futures...that's a bit of exciting news in the petrol station world.

[Beagle]

Probably pay to follow whatever octane rating the manufacturer recommends for your engine, so will make sharing a bit harder but yes the futures and location thing is interesting as you can buy up to 1000 litres at a time. I see Z are very careful not to market this as a way around the Auckland regional fuel tax but with the ability for motorists to buy up to 1,000 liters pre-paid from one region and use it anywhere...I think one of its advantages is plain for all Auckland motorists to see.
https://sharetank.co.nz/#buy-your-way
Probably a cunning plan and will gain them back a small amount of much needed market share.
How many Auckland motorists are suddenly going to find an excuse to visit Hamilton and husband and wife, (by some remarkable coincidence lol), decide to buy 1,000 litres of fuel prepaid each, while they are there ?

[ananda77]

Probably pay to follow whatever octane rating the manufacturer recommends for your engine, so will make sharing a bit harder but yes the futures and location thing is interesting as you can buy up to 1000 litres at a time. I see Z are very careful not to market this as a way around the Auckland regional fuel tax but with the ability for motorists to buy up to 1,000 liters pre-paid from one region and use it anywhere...I think one of its advantages is plain for all Auckland motorists to see.
https://sharetank.co.nz/#buy-your-way
Probably a cunning plan and will gain them back a small amount of much needed market share.
How many Auckland motorists are suddenly going to find an excuse to visit Hamilton and husband and wife, (by some remarkable coincidence lol), decide to buy 1,000 litres of fuel prepaid each, while they are there ?

Totally correct. The 1000ltr option is a real winner (I mean someone shares paid storage for you???...something unheard of apart from 15 GB Google Drive storage), but would preferably only use the full fill potential in connection with a crude crash. Otherwise, 2 or 3 tank loads,while in Napier or anywhere else in country-NZ.

[ananda77]

btw, I never have Z considered to fill up, but with this brilliant sharetank idea, I am now a good friend. Tomorrow, will buy another small share parcel..

[ananda77]

The 1000ltr. option is exiting indeed not only in case of a crude crash. IF, you have the cash, invest it at 10% for 6 month, charge your gemvisa interest free for 6 month for the fuel and pocket the profit (Z-YUM)

[Snow Leopard]

This seems like a lot less interesting version of buying 3 beers for the price of 2 and 'parking' 1 or 2 of them for your next visit.

[ananda77]

This seems like a lot less interesting version of buying 3 beers for the price of 2 and 'parking' 1 or 2 of them for your next visit.

Yes that's right, unless Z finds a way to make their fuel drinkable as well

[Beagle]

This seems like a lot less interesting version of buying 3 beers for the price of 2 and 'parking' 1 or 2 of them for your next visit.

You wouldn't want to get Cat-O-Tonic eh :)

ZEL continues to plumb fresh multi year lows today, confounding analysts who on average think it should outperform. https://www.marketscreener.com/Z-ENERGY-LTD-14473098/consensus/

[winner69]

I see shareprice almost in the 4's

Go ex divie or something?

[Beagle]

Yes it did.

[Joshuatree]

You wouldn't want to get Cat-O-Tonic eh :)

ZEL continues to plumb fresh multi year lows today, confounding analysts who on average think it should outperform. https://www.marketscreener.com/Z-ENERGY-LTD-14473098/consensus/

Although its gone from 4 Buys 1 outperform and 1 hold to
3 buys 1 outperform 1 hold and 1 underperform over a year plus. My broker has a 1 year target of $6.38.
Disclose still holding.

[winner69]

Yes it did.

Shareprice pretty low though, seeing it was close to 6 bucks not that long ago

[Beagle]

Shareprice pretty low though, seeing it was close to 6 bucks not that long ago

Yes it sure is and as noted previously they face a number of headwinds. The Governments reaction to final recommendations of the fuel study to be released on 5 December will be very interesting. I wonder if Jacinda will get back on her "motorists are being fleeced hobbyhorse" given that according to ZEL's reporting their margins are under real pressure and return on capital invested is at a multi year low.

[macduffy]

I wonder if Jacinda will get back on her "motorists are being fleeced hobbyhorse" given that according to ZEL's reporting their margins are under real pressure and return on capital invested is at a multi year low.

And she'll probably take credit for that.

;)

[Beagle]

Yes, she'll take credit for anything that she thinks will build her political capital.

Meanwhile over at ZEL, the share price plums another multi year low closing today at just $5.03.
Buying on a confirmed downtrend is usually a very risky strategy.
I think this looks like a real value trap. Might find a bottom in the mid $4's but who knows...
Only a couple of weeks to go until we see what Punch and Judy show the Government will try and concoct over fuel margins...
This was one of her most recent rants https://www.tvnz.co.nz/one-news/new-zealand/jacinda-ardern-vows-not-stand-petrol-report-finds-kiwis-being-fleeced
I think we all know who's really fleecing us ;)

[Grimy]

Yes, she'll take credit for anything that she thinks will build her political capital.

Show me a politician of any persuasion who wouldn't...………..

[Joshuatree]

Yes, she'll take credit for anything that she thinks will build her political capital.
over fuel margins...
;)

LOL. You take credit all the time.Infinite self rubbing.
Lets wait and see . From my experience our Prime Minister does the opposite.She really needs to take more credit for righting the last Govt's wrongs.

[Beagle]

I put in a lot of effort on here to post detailed analysis on many stocks and I know a lot of people appreciate it.
By and large I think Jacinda is doing a good job, (did a really outstanding job with the Chch massacre aftermath), and Grimy makes a fair point.

[couta1]

I put in a lot of effort on here to post detailed analysis on many stocks and I know a lot of people appreciate it. Unfortunately you'll never please everyone especially outspoken radicals, loose units are hard to moderate.

[BlackPeter]

I put in a lot of effort on here to post detailed analysis on many stocks and I know a lot of people appreciate it.
By and large I think Jacinda is doing a good job, (did a really outstanding job with the Chch massacre aftermath), and Grimy makes a fair point.

I second that.

Quite sad when holders (clearly suffering under the endowment effect) prefer to shoot the messenger instead of appreciating the exposure to differing views.

Please continue what you are doing ... only a wide variety of views makes it worthwhile to read this forum.

[Bjauck]

I put in a lot of effort on here to post detailed analysis on many stocks and I know a lot of people appreciate it.
By and large I think Jacinda is doing a good job, (did a really outstanding job with the Chch massacre aftermath), and Grimy makes a fair point. I second that too. I don't necessarily agree with all opinions but I appreciate the contributions from people with different experiences, more relevant skills and acumen than myself. That all makes a forum.

[Joshuatree]

Ditto, me too.

[Jim]

I see shareprice almost in the 4's

Go ex divie or something?

Closed at $4.90. Time to pick up a few thousands shares today. The yield is so tempting that I just mortgage my house for the BUY

[winner69]

Closed at $4.90. Time to pick up a few thousands shares today. The yield is so tempting that I just mortgage my house for the BUY

Does look awfully cheap doesn’t it

No matter what punters still need to fill up the car eh

[Beagle]

The rate at which they're losing market share which seems to be accelerating should be ringing alarm bells at head office. To lose (from memory) another 2.6% retail market share in the last half is pretty sizeable considering many people have entrenched patterns about where they fill their vehicles.

The change in loyalty scheme could be a factor here or are the various fuel company minnows as well as Gull taking their market share ?

The new app discussed recently wherein canny Auckland motorists can buy up to 1,000 litres outside the Auckland area, (2,000 liters per couple of they have separate apps) is the first creative attempt to stem the market share loss but could:-
a) run foul of the regulators, (its been noted by several people I have discussed this with that Z were very careful to avoid using Auckland as a reference point in their marketing which is probably a very wise move)
b) result in an "own goal" as effectively people buy the cheapest fuel in a 30km radius thus compressing margins even further. (Just as well its a trial so they can ascertain its effect carefully).

Then there's the regulatory overhang.

Cheap for good reasons.

Interested but I am inclined to wait until:-
A confirmed bottom is in the share price with the minimum TA indicator being a break up through the 30 day moving average, (preferred TA measure, break up through the 100 day MA)
The regulatory environment is clear
Confirmation that market share loss has slowed down significantly.

I would rate the chances of a further downgrade to the current year profit and dividend forecast as being more than 50%.

[whome]

Well said Bjauck. I endorse the comments from you and BP. Not all of us have the time for in-depth analysis of stocks. I sure as hell appreciate the ST informed commentary.

[King1212]

Beagle..great post...what do u think is a good entry for ZEL? Thanks

[Beagle]

Beagle..great post...what do u think is a good entry for ZEL? Thanks

Thanks. Very difficult question because the narrative could easily change quite significantly at any point, just as it did quite recently with their latest profit downgrade.
The company has had a history of disappointing the market in recent times which does make me wonder a bit about how good their reporting systems are.
What was clear from the most recent update is that ZEL is right at the very bottom of its guidance range and meeting the bottom of same is contingent upon no further erosion in margin.
My opinion - Further erosion could occur through:-
More intensive discounting by their competitors
Their own discounting scheme which only recently allows stacking of retail discounts at both ZEL and Caltex stations
Their own ZEL app
Regulatory intervention

Volume could also be eroded and Gull for instance are known to be trying to muscle in on their Jet fuel supply contract at Auckland airport.

Capital will be required for new expanded jet fuel supply storage in South Auckland or the Govt have said they will intervene / regulate to ensure an added margin of safety with critical fuel supply.

Recently I had thought mid $4's might be a good entry point but my strategy is to now wait until a bottom is into the share price and a new uptrend has commenced.
Its risky to buy into any confirmed downtrend and try and bottom pick and ZEL is making new multi year lows for good reasons. The compression in margin, especially, and loss of market share are quite significant factors in my view with the potential to make themselves felt quite significantly more.

10861 My plan is to follow the technical's with this one and open up a half sized position in due course when the share price breaks up through the 30 day moving average, (red line) and double down on that if it breaks up through the 100 day moving average (black line).

ZEL's history of surprising the market and the unknown extent of any possible regulatory risk makes this a very risky stock to try and have a predetermined buy price. Hope that helps. We're only 12 days out from the fuel study release (5 December) and a short time thereafter we should see an announcement by the Government on what they propose to do about it, if anything. Makes sense to wait and see what happens in that regard, in my opinion.

[peat]

Yes appreciate your thoughts Beagle, but please, go out and enjoy some sunshine on this lovely weekend day

[couta1]

Be Greedy when others are Fearful.

[RupertBear]

Be Greedy when others are Fearful.

You backing up one of your trucks again Couta! :D

[winner69]

We have takeoff

Shareprice wont be this low again ...maybe never

[Beagle]

Be Greedy when others are Fearful.

That famous saying of Warren Buffet is a good one for situations where there is genuine market panic and fear.
In my view that's not the case here. The market appears to be rationally marking the stock down steadily to reflect the declining fundamental's of the business and the extra regulatory risk. If they keep losing market share and retail margins are eroded further either through regulatory intervention or competitive pressure, then its likely to head materially lower. That's why I've referred to this one as a classic value trap. Its looks cheap, but the bitter taste of poor quality lingers long after the thrill of an apparent bargain.

[couta1]

That famous saying of Warren Buffet is a good one for situations where there is genuine market panic and fear.
In my view that's not the case here. The market appears to be rationally marking the stock down steadily to reflect the declining fundamental's of the business and the extra regulatory risk. If they keep losing market share and retail margins are eroded further either through regulatory intervention or competitive pressure, then its likely to head materially lower. That's why I've referred to this one as a classic value trap. Its looks cheap, but the bitter taste of poor quality lingers long after the thrill of an apparent bargain. Just do it.:D

[Beagle]

Just do it.:D

Who can forget the Prime Ministers recent outrage that motorists are being "fleeced" and we're going to do something about it !! (Don't forget its an election year next year so its all about being seen to do the right thing irrespective of whether motorists really are being fleeced or not).
5 December 2019, mark it down in your diary for the final fuel study release and the Government's response shortly thereafter.
A pretty obvious and significant headwind I would have thought...

[couta1]

I actually did take a decent punt this time last year (with no chart of FA support) and bought a decent stake at $5.20 and did well out of it.
My sense is the fundamental's have deteriorated quite significantly since then. To make another bold call like that I'd need to see the share price quite a bit south of where it is today. And let's not forget who gave you the tip off at that point, remember the phone call.

[Beagle]

Yes thanks. There's a time to be brave, (factors affecting last half's result in November 2018 appeared to be quite clearly one-off events at the time), but there's a time to accept that the underlying fundamental's have deteriorated materially. My view is $4.50 today, (excluding regulatory risk) is where the share price needs to be to reflect today's underlying business performance that would make it the same value as $5.20 a year ago. Then we need to factor in the unknown extra regulatory risk and how you do that at this point is anyone's guess.

[couta1]

Between $4.85 and $5 looks the likely trading range IMO.

[winner69]

Been talk of Z losing market share so had a look at their quarterly data reports

Yes share is going down....and quite markedly

It’s probably even worse than it looks because in the last 2 or 3 quarters Gull volumes have not been included in Industry Volumes.

Means Z share on an apples for apples basis (allowing for Gull) is lower than reported. It does not appear they have (notionally) adjusted for the change in reporting. Might be wrong but that seems the case.

Image is how I see it

How low can Z share go?

[Beagle]

Looks like an accurate depiction of the fairly grim state of affairs.
Your last point is the $64,000 question ?

[BlackPeter]

Been talk of Z losing market share so had a look at their quarterly data reports

Yes share is going down....and quite markedly

It’s probably even worse than it looks because in the last 2 or 3 quarters Gull volumes have not been included in Industry Volumes.

Means Z share on an apples for apples basis (allowing for Gull) is lower than reported. It does not appear they have (notionally) adjusted for the change in reporting. Might be wrong but that seems the case.

Image is how I see it

How low can Z share go?

Are they including MGP and NPD? Both discounters are extending their network pretty aggressively in the South Island and either built or took over petrol stations along the main arteries.

On our "home run" (SH73 west of Christchurch) just recently two brand new NPD petrol stations popped out of the ground (one in Yaldhurst, the other one in Darfield) and both have big signs "opening soon". Earlier this year we noticed on a Southwards trip into the McKenzie country that MGP placed cheap 24/7 petrol stations along the Inland route. Some more new NPD petrol stations at the big roads at various places in Christchurch.

Ideal for truckies and anybody else travelling a lot ...

I recon the huge margins of the big four have been just too tempting for a number of smaller players to ignore ... but hey - nothing better than a nice little price war (well, for consumers this is).

BTW: I wouldn't even know where to find these days around our place a Z petrol station. The last one I can remember has been taken over more than a year ago by Mobil ...

[Beagle]

This is the problem that ZEL management appear to be in a "state of denial" about. Huge cumbersome organisation with thousands of staff that keeps adding to its costs when the market is saying they should do the exact opposite and streamline their head office costs down.

I know Kingfish used to have a shareholding and are known to often meet with the management of the companies they invest in. They got out last year.
The other thing that makes me wonder is overseas many fuel companies are investing in the roll out of fast charging stations to offset the decline in fuel volume through EV adoption.
It would be nice for EV owners to sip their coffee and nibble on their pies and snacks at a Z station while they wait for their cars to be charged up wouldn't it ?
You'd think ZEL would be proactive in this regard but obviously that's expecting too much of management who appear to be behind the ball, not trying to get ahead of it.

Industry standard leases that run for 15 years to align with fuel tank replacement cycles usually have annual or bi-annual ratchet clauses of the inflation rate or 2% per annum, whichever is the greater increase. This could eventually be very problematic for ZEL if fuel volumes and margins continue to decline year on year.

[freddagg]

Are they including MGP and NPD? Both discounters are extending their network pretty aggressively in the South Island and either built or took over petrol stations along the main arteries.



Who are MGP, did a google search and cannot find them.
McKeowns would be the biggest discounter around here (Southland) and I think they might be supplied by Z. The Z logo is on the card and the fine print says that Z own the card.

[BlackPeter]

Who are MGP, did a google search and cannot find them.
McKeowns would be the biggest discounter around here (Southland) and I think they might be supplied by Z. The Z logo is on the card and the fine print says that Z own the card.

Fair enough - I meant to write "MGL" ... and I noticed that on Google Earth some of the MGL stations I remember are called "McKeown". Actually MGL seems to be used synonymous for McKeown (https://mckeown.co.nz/) given that the McKeown site offers a login for MGL staff ...

Would be surprised though if they are owned by Z and no Z logo on the card depicted on their site ... but they might accept each others payment cards.

[winner69]

Who are MGP, did a google search and cannot find them.
McKeowns would be the biggest discounter around here (Southland) and I think they might be supplied by Z. The Z logo is on the card and the fine print says that Z own the card.

I think MGP is your McKeowns .....McKeown Group

[freddagg]

Fair enough - I meant to write "MGL" ... and I noticed that on Google Earth some of the MGL stations I remember are called "McKeown". Actually MGL seems to be used synonymous for McKeown (https://mckeown.co.nz/) given that the McKeown site offers a login for MGL staff ...

Would be surprised though if they are owned by Z and no Z logo on the card depicted on their site ... but they might accept each others payment cards.

Thanks for clearing that up.

It is my new card that has just arrived that has the Z logo and the claim that the card is owned by Z. The old card still on their website image.

[Beagle]

Been talk of Z losing market share so had a look at their quarterly data reports

Yes share is going down....and quite markedly

It’s probably even worse than it looks because in the last 2 or 3 quarters Gull volumes have not been included in Industry Volumes.

Means Z share on an apples for apples basis (allowing for Gull) is lower than reported. It does not appear they have (notionally) adjusted for the change in reporting. Might be wrong but that seems the case.

Image is how I see it

How low can Z share go?

Was $4.15 5 years ago. Fuel volumes now stagnant for some time and we may have passed peak fuel already with newer ICE engines being considerably more fuel efficient and strong growth in hybrid sales and ongoing growth in EV sales. Even Jet fuel no longer growing, margins under pressure and loss of market share...could it go back to test that $4.15 or even test support at $4? I think there's a pretty good chance of that.

[couta1]

The Fearful are coming out so time to take a few shares off their weak hands. PS-Must be all Beagles and winners downramping that's scaring them.

[Beagle]

The Fearful are coming out so time to take a few shares off their weak hands. PS-Must be all Beagles and winners downramping that's scaring them.

https://www.youtube.com/watch?v=UyroIv7Q5B0 Be careful mate.

[winner69]

Market share as reported by Z is about 2% points which doesn’t sound much.

Often good idea what does this represent in say litres

I reckon (allowing for the change in reporting industry volumes) Z’s lost share is the equivalent of 300 million litres ...that’s 300 million litres competitors have ‘stolen’/taken from Z

Z say their profit is about 4 cents / litre profit so 300 million litres is about $12m of profit gone.

Industry litres are just over 9,000 million litres so hope I have not stuffed up billions and millions but I think I’m right

[Timesurfer]

I use a Caltex card which is Z in other clothing - they now let me fill up at Z too.
I see NPD are opening a new station at Springs Junction.

[winner69]

The Fearful are coming out so time to take a few shares off their weak hands. PS-Must be all Beagles and winners downramping that's scaring them.

Don’t blame me Couts ...I said the share price was on fire and heading back over 5 bucks and then you mentioned 485 and it was downhill from then a

[winner69]

Going well today ....share price over 5 bucks by end of day I hope.

[Rabbi]

I note there has been a fair bit of scaremongering and downramping, in respect of ZEL's future prospects as a listed company.
With regard to the imminent report, it would be the pinnacle of double standards, to intervene in and industry where
the greatest percentage of the price is govt. excise tax.
Regardless of the fact that in some areas of the country competition is negligible, it cannot be overstated the difficulty retailers
have price gouging, ( Jacinda's words) when the largest component of the price is tax.
I note that the Govt. has no intention of regulating the dairy market, where there is essentially one player, who forces consumers to
pay through the nose for milk, cheese, and yogurt every time you go to the supermarket.

[Beagle]

Going well today ....share price over 5 bucks by end of day I hope.

Caltex in Australia getting taken over has sparked a bit of interest in this sector.

[Joshuatree]

They are doing defensive IPO of their prop assets to ward off a takeover like VEA have (i hold)
Caltex Announces Plans For Property IPO (https://hotcopper.com.au/threads/5093137/)

[ananda77]

Good to know Z is taking the fight to the Gull competition.

Filled up at Z in Botany area today. 95 base price: 239.9 minus 10c discount = 229.9 (+FlyBuys). The cheapest Gull has to offer in the area for 98 = 234.7 (most Gull stations offer 236.7)

Was in Napier this weekend. The port looks smallish, but lots of containers loading and lots of logs on the piers. Main traffic between Taupo and Napier - Log trucks - . Anyway, Gull offered a super cheap 214.7 for 98. So filled up the tank and used Z sharetank to buy a few loads 95 for 224.9.

[Beagle]

Coutts owes me a cider if Jacinda says that motorists are being "fleeced". Fuel study report out tomorrow. ZEL has been weaker lately, leaky ship of a tough report ?

[winner69]

Coutts owes me a cider if Jacinda says that motorists are being "fleeced". Fuel study report out tomorrow. ZEL has been weaker lately, leaky ship of a tough report ?

Couts won’t be buying

Tomorrow will be a non event in reality

[stoploss]

https://www.stuff.co.nz/business/117929994/petrol-companies-told-by-regulator-how-to-improve

[bull....]

https://www.stuff.co.nz/business/117929994/petrol-companies-told-by-regulator-how-to-improve

bit of a ho hum what we already knew that petrol companies and the govt rorting us

"The combination of infrastructure sharing and restrictive supply relationships gives the major fuel companies an advantage. There is a reduced ability for importers to compete for customers of the majors and for distributors and dealers to obtain competitive wholesale supply terms."
The terminal-gate pricing regime would improve competition by creating the potential for a liquid spot wholesale market to develop, Rawlings said.

the above might create more competition and crimp z profits over time

https://www.stuff.co.nz/business/117929994/petrol-companies-told-by-regulator-how-to-improve

[winner69]

Kept some people busy ...the report is 589 pages

Ho hum stuff made even more boring but heck 589 pages means somebody has done a good review

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291094

I asked Mrs Beagle to get some popcorn sorted out for later today. Should be an entertaining day once Jacinda weigh's in.
I'd bet my last dollar the term "fleeced" will be used.

What is clear at this stage is that over time ZEL's profits are going to come under even more pressure so I'm am out and staying out and I do not believe their forecast dividend this year of (at the mid point of forecast 49 cps), is sustainable.

[flyer]

Z are going to release a statement - conference call this afternoon

[peat]

"
BP responded to the report by saying it needed to read it more fully"

I still think the Marsden refinery is an asset owned jointly by the Big Four and I dont understand the principle of why they must share. Its their toy and they might not want to share.

[macduffy]

Yes, I'm inclined to that view too, peat, although the big oil co's don't own the refinery outright, of course. How many players do you need in an industry to ensure competition? The answer of course is - it's political.

[bull....]

the stickers on fuel caps will bring the price down lol

[Beagle]

Yes, I'm inclined to that view too, peat, although the big oil co's don't own the refinery outright, of course. How many players do you need in an industry to ensure competition? The answer of course is - it's political.

We had 5 major players including Gull and Caltex until the Commerce Commission in its "infinite wisdom" decided a few years ago that it was okay for Caltex and ZEL to merge.
Surely this is a major egg on face moment and its now completely obvious that competition has been undermine by that merger.

Over time I have witnessed the premium grades of fuel basically doubling the price premium they used to trade at compared to 91 Octane.
e.g. ZEL used to sell 95 octane for 5-6 cents per liter more than 91 Octane about 6-8 years ago. 95 Octane is now 14 cents dearer than 91 at most of their stations.

98 Octane used to be 16-18 cents per liter dearer at BP than 91 Octane and is now well north of 30 cents per liter more expensive than 91.
A good thing is this price board for all grades as I think the dramatic widening of margins for premium grades of petrol is unjustified and I know from some recent article that the AA is of the same view.

[winner69]

We had 5 major players including Gull and Caltex until the Commerce Commission in its "infinite wisdom" decided a few years ago that it was okay for Caltex and ZEL to merge.
Surely this is a major egg on face moment and its now completely obvious that competition has been undermine by that merger.

Over time I have witnessed the premium grades of fuel basically doubling the price premium they used to trade at compared to 91 Octane.
e.g. ZEL used to sell 95 octane for 5-6 cents per liter more than 91 Octane about 6-8 years ago. 95 Octane is now 14 cents dearer than 91 at most of their stations.

98 Octane used to be 16-18 cents per liter dearer at BP than 91 Octane and is now well north of 30 cents per liter more expensive than 91.
A good thing is this price board for all grades as I think the dramatic widening of margins for premium grades of petrol is unjustified and I know from some recent article that the AA is of the same view.

AA rather hypocritical .......are they going to end the AA Smartfuel program which is one of the causies of motorists being ‘fleeced’

[winner69]

Stuff headline “Petrol could fall 18c a litre if fuel retailers forced to show price”

Jeez - Z only make 4 to 5 cents a litre now.

[Beagle]

Incentive schemes a dime a dozen mate...seems almost everyone has one so I'm not sure you can legitimately call them out for being hypocritical for that.
https://www.stuff.co.nz/business/117929994/petrol-companies-told-by-regulator-how-to-improve "In some cases, premium was selling 40c to 50c a litre higher than 91 Octane, which Stockdale said was "outrageous".
This rort has been going on for far too long !

What's very clear going forward is ZEL's margins will come under increasing pressure and if they thought their margins were under unprecedented pressure this last six months, they ain't seen nothing yet ! Its very clear in my opinion the current forecast dividend rate is not sustainable in the medium term.
The rational move would be for ZEL to streamline their organisation but reading through one or two of their recent presentations management think they're still a "growth company" Say what ???

Prices could come down 18-32 cents per liter https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291251
"Prime Minister Jacinda Ardern is the fleecer-in-chief," Bishop said."

[winner69]

Point being fuel cards apparently have lead to higher margins ....the thing AA moan about

From the 589 page report

[Beagle]

"and discounting has been associated with higher margins overall" Emphasis added. Doesn't actually say its causative though does it.
I think margin creep is unrelated and would have happened regardless. You see this with the margin expansion on premium grades of fuel that I've talked about today. Totally unrelated to discounting, the margin expansion on premium has been dramatic because its less transparent and they've done it simply because they can get away with it.

Bit surprised the shares haven't come in for more selling pressure today.

[Jay]

"and discounting has been associated with higher margins overall" Emphasis added. Doesn't actually say its causative though does it.
I think margin creep is unrelated and would have happened regardless. You see this with the margin expansion on premium grades of fuel that I've talked about today. Totally unrelated to discounting, the margin expansion on premium has been dramatic because its less transparent and they've done it simply because they can get away with it.

Yes agree beagle, not that I use premium grade but all the reporting by the "media/commentators" is on 91 and to a lesser extent diesel, leaving them to edge up the higher grades more or reduce them less than 91

[Beagle]

Stuff headline “Petrol could fall 18c a litre if fuel retailers forced to show price”

Jeez - Z only make 4 to 5 cents a litre now.

Exactly. Trouble is coming with the profitability of ZEL as sure as night follows day...
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291165

[peat]

Exactly. Trouble is coming with the profitability of ZEL as sure as night follows day...

not that sure , I mean, that is really, really, really sure, and lots of things could happen that mitigate this current crusade.

[winner69]

Jeez, media and now a guy on TV saying petrol going drop in price by 10 cents to 18 cents

Either they have no idea or Z going to go broke.

[King1212]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291391

Would love to see Z goes broke.. bloody fuel is always more expensive than others

[macduffy]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291391

Would love to see Z goes broke.. bloody fuel is always more expensive than others

Do you think that one less competitor increases competition?

;)

[Baa_Baa]

I find the lack of recognition of the government tax around 40% of the cost of fuel, to be both ignorant and confronting. Govt taxes were out of scope for the review so not surprisingly they weren’t mentioned (careful manipulation of scope). The result beats up the industry without acknowledging which party is doing the gouging. The government is the real reason for high fuel prices, not the companies. This is bad for shareholders.

[couta1]

I find the lack of recognition of the government tax around 40% of the cost of fuel, to be both ignorant and confronting. Govt taxes were out of scope for the review so not surprisingly they weren’t mentioned (careful manipulation of scope). The result beats up the industry without acknowledging which party is doing the gouging. The government is the real reason for high fuel prices, not the companies. This is bad for shareholders. Well said and yes Fleecinda is in denial blaming the fuel companies. Bad for shareholders for sure, sold my trading parcel for a loss today as I see this stock at $4.50 in due course.

[Beagle]

Terms of reference of this fuel price enquiry were deliberately obtuse resulting in blatant obfuscation. The results are carefully crafted so as to be deliberately disingenuous.

Justice Mahon if he were alive today might even call this "an orchestrated litany of lies"

We're now operating in an environment where the Govt are happy to make political capital with scant regard for treating companies equitably.

ZEL in 2019, who's the Govt's next whipping boy for 2020 ?

[RTM]

Terms of reference of this fuel price enquiry were deliberately obtuse resulting in blatant obfuscation. The results are carefully crafted so as to be deliberately disingenuous.

Justice Mahon if he were alive today might even call this "an orchestrated litany of lies"

We're now operating in an environment where the Govt are happy to make political capital with scant regard for treating companies equitably.

ZEL in 2019, who's the Govt's next whipping boy for 2020 ?

I’ve been waiting for them to address power prices. But I guess they did that in a different way with the winter heating supplement.

[Beagle]

I’ve been waiting for them to address power prices. But I guess they did that in a different way with the winter heating supplement.

Another piece of "brilliantly targeted" social welfare. People worth $10m+ get it too.

Mike Bennetts on national t.v. news last night said words to the effect of, we only make 3.5 cents per liter of fuel.
We've been looking forward to more transparency, (this registered loudly on my B.S. metre) and have ordered the new billboards already at a cost of $2m. (New bigger billboards to enable the display of premium fuel prices).

Separately, the Govt recently threatened legislation if the big three don't build more resiliency into the jet fuel supply at Auckland airport and ZEL's share of expanded capacity has been talked about as $9m.

So there's $11m in capex required right there just to satisfy new regulatory requirements and if we assume a notional 9% expected return on capital that wipes $1m per annum of future earnings straight away and that's even before the effects of increased competition start making themselves felt !

I got to thinking, the Govt is hoping extra competition results in fuel price decreases of 18-32 cents per liter, (as reported yesterday). Mid point of that is 25 cents per liter.

Heck, if its just one tenth of that, that's 2.5 cents per liter and seeing as they only make 3.5 cents per liter after all costs, crikey the effect on profitability could be quite dramatic to say the least !

[Joshuatree]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12291094

I asked Mrs Beagle to get some popcorn sorted out for later today. Should be an entertaining day once Jacinda weigh's in.

I'd bet my last dollar the term "fleeced" will be used.




Havnt heard her say that yet, have you?

[couta1]

Havnt heard her say that yet, have you? She is in charge of the biggest fleecing outfit in NZ so action speaks louder than words, if she was serious about petrol costs then GST would be removed immediately which would provide more benefit and relief than hounding fuel companies for a few cents.

[Beagle]

Give her time.
https://www.msn.com/en-nz/money/business/fixing-a-dysfunctional-fuel-market/ar-BBXOmqU?ocid=spartandhp

[Rabbi]

As I said before this is the best example of double standards by a Labour govt I've ever come across and I'm a card carrying Labour member.
I regard this lot, (apart from Andrew Little) as the most disingenuous bunch of hypocrites I have ever had the
dubious distinction to behold.
For example, with the tax rate over $ 48,000 -which isn't a lot of money-being 30%, they are quite happy to pillage and plunder every workers measly
pay increase to the tune of 30%, and thereby shaft their own working constituency, as well as milk them dry with excise tax
every time they go to the petrol pump.
Then there is 15% G.S.T. after that, as well as Govt. charges going up on a regularly basis. I mean, how much does it cost to print a passport.
They are venal hypocrites and a disgrace to humanity.

[Joshuatree]

Give her time.
https://www.msn.com/en-nz/money/business/fixing-a-dysfunctional-fuel-market/ar-BBXOmqU?ocid=spartandhp

Might be prudent to practice chewing $1 and $2 coins.;)

[Beagle]

As I said before this is the best example of double standards by a Labour govt I've ever come across and I'm a card carrying Labour member.
I regard this lot, (apart from Andrew Little) as the most disingenuous bunch of hypocrites I have ever had the
dubious distinction to behold.
For example, with the tax rate over $ 48,000 -which isn't a lot of money-being 30%, they are quite happy to pillage and plunder every workers measly
pay increase to the tune of 30%, and thereby shaft their own working constituency, as well as milk them dry with excise tax
every time they go to the petrol pump.
Then there is 15% G.S.T. after that, as well as Govt. charges going up on a regularly basis. I mean, how much does it cost to print a passport.
They are venal hypocrites and a disgrace to humanity.

Very good post. https://www.stuff.co.nz/timaru-herald/news/117633935/timarus-new-unmanned-fuel-station-has-come-under-criticism
What this confirms is that Aucklanders are currently paying just on 80 cents in Govt levies inclusive of Auckland road tax plus GST.
At an average of about $2.30 for fuel in Auckland GST is another 30 cents of that so that's a total of ~ $1.10 in Govt imposed charges per liter of petrol for over 1.5m motorists in Auckland.

There is no argument that this is highway robbery. ZEL makes 3.5 cents per liter after all costs and tax. I think its crystal clear who is the "real fleecer"

[bohemian]

If you'd like to suggest how Auckland's roads and national roads should be financed that would be good. But a reminder, Aucklanders only pay about 70% of the property rates, water included, than i do in ChCh . So maybe they just need to suck it up.

[Beagle]

My view is that ~ 1.5m Aucklanders already pay a disproportionate share of national roading costs in that many from Auckland very rarely venture south of the Bombay's.
The Auckland regional fuel tax just adds insult to injury. I have a deep suspicion that not all of the money collected in fuel excise levies is actually spend on roads.
How much gets siphoned off to the consolidated fund, that's the real question ?

Maybe the tourists, (the ones who most commonly use roads like the one down the West Coast that badly needs major repairs once again after the current floods), should pay tolls on these sections of roads that most Kiwi's very seldom use ?

[RTM]

My view is that ~ 1.5m Aucklanders already pay a disproportionate share of national roading costs in that many from Auckland very rarely venture south of the Bombay's.
The Auckland regional fuel tax just adds insult to injury. I have a deep suspicion that not all of the money collected in fuel excise levies is actually spend on roads.
How much gets siphoned off to the consolidated fund, that's the real question ?

Maybe the tourists, (the ones who most commonly use roads like the one down the West Coast that badly needs major repairs once again after the current floods), should pay tolls on these sections of roads that most Kiwi's very seldom use ?

Tut tut Beagle....what about our poor farmers ?
Our roading network is an extensive (unspoken) subsidy for them.

[flyer]

Petrol was $1.30 labour weekend in Adelaide, have no idea if they pay tax but take away the $ 1 or so we pay in tax and we be paying the same. The govt report and the "fleecing comments" are a crock of **** - but put in the public and they believe it.

[Beagle]

Petrol was $1.30 labour weekend in Adelaide, have no idea if they pay tax but take away the $ 1 or so we pay in tax and we be paying the same. The govt report and the "fleecing comments" are a crock of **** - but put in the public and they believe it.

My point exactly. Australians do pay fuel excise with their fuel, (which maintains their vast national roading network) but $A1.30 = N.Z.1.35 throws into stark contrast how badly fleeced Kiwis are with our fuel excise charges ! How can they maintain their vast raod network so efficiently compared to how we're so obviously price gouged ?

[clearasmud]

My point exactly. Australians do pay fuel excise with their fuel, (which maintains their vast national roading network) but $A1.30 = N.Z.1.35 throws into stark contrast how badly fleeced Kiwis are with our fuel excise charges ! How can they maintain their vast raod network so efficiently compared to how we're so obviously price gouged ?

Gold Coast Qld was $1.34 earlier this week but about $1.54 last week.

When Shell was around we only paid something like Ausi price plus 10c/Liter.

Somethings gone wrong.

[couta1]

Gold Coast Qld was $1.34 earlier this week but about $1.54 last week.

When Shell was around we only paid something like Ausi price plus 10c/Liter.

Somethings gone wrong. Sure has its called MMP which equals More Morons in Parliament.

[Jay]

Something has gone wrong clearasmud.
I have a cousin in Aussie and the price use to be about 20 cents different apart from the exchange rate, however this from Mr/Mrs/ms Google this morning
"As of this morning in Sydney, the cheapest petrol is $1.24 a litre, with the highest at $1.74. In Melbourne, the cheapest is $1.27 and the most expensive also $1.74. And in Brisbane, the cheapest is $1.27 and the priciest $1.76.Nov 19, 2019"
Even the highest price is a lot less than ours after the exchange rate!

[macduffy]

Something has gone wrong clearasmud.

It wouldn't be a difference in tax rates, would it?

;)

[Bjauck]

Sure has its called MMP which equals More Morons in Parliament. Surely MMP is better than the previous system. 1981 saw the the socialist National Party headed by Muldoon with a majority of seats in Parliament despite only getting 39% of the vote. Previous election in 1978, saw the National Party get 40% of the vote and a majority of seats. In both elections more people actually voted for Labour candidates.

How much competition in fuel supply can an isolated small disperse market such as NZ actually support?

[winner69]

This is one HUGE EARNINGS DOWNGRADE ......along with a likely 20% cut in expected dividend

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ZEL/345952/313959.pdf


Bit if a sad story ......but once again hope of a better ‘rest of year’ has not turned into reality

But reading between the lines i’d say there is a lot of hope that post December things are going to get much better ...so they can meet this latest guidance

[winner69]

Beagle told us this was going to happen ...betcha even he is surprised as to how soon after the last announcement just a few weeks ago,

[BlackPeter]

This is one HUGE EARNINGS DOWNGRADE ......along with a likely 20% cut in expected dividend

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ZEL/345952/313959.pdf


Bit if a sad story ......but once again hope of a better ‘rest of year’ has not turned into reality

But reading between the lines i’d say there is a lot of hope that post December things are going to get much better ...so they can meet this latest guidance

They say if they reduce the dividend, than sell. But this is probably as good a signal as the cross of death, it just means one should have sold a long time ago.

Feeling for the holders - but expect volumes and margins long term to keep sliding.

[King1212]

Good old Beagle..has a magic nose that can even sniff a black truffle in the forest....

[stoploss]

Losing a prime wellington spot here, this is always pretty busy .
https://www.stuff.co.nz/business/118081134/baseisolated-and-green-star-building-to-be-developed-for-the-bnz-hq-in-wellington

[couta1]

Heading for $4.50 as a few of us thought it would.

[Beagle]

Interesting they cut EBITDA guidance by an amount in line with my expectations but dividend guidance is cut by nearly 20% from a mid point of 49 cents previously to 40 cents. That's a bit surrpiseing, I would have thought 42-44 cps. Perhaps the size of the dividend guidance cut signals the lack of confidence they have about their business model as a result of pending legislative changes ?

Serious dividend cut could also be as a result of capex requirements I was previously alluding too, $2m for new fuel price display signs and ~ $9m for expanded jet fuel capacity at their Wiri storage facility.

Too early to have a think about whether 40 cents is the new benchmark to think about in terms of future years dividends but the new EBITDA guidance is a fresh multi year low that won't surprise me if its very sticky.

I feel sad for shareholders. I don't have much confidence in Mike Bennetts for reasons I won't go into.

$4 on the cards now.

[bull....]

pe looks very high

[couta1]

Heading for $4.50 as a few of us thought it would. Way too optimistic by the looks, yep $4 Beagle. PS-Glad I bailed on a bad trade at $4.98. PPS-Put a cheeky bid on at $3.80

[BlackPeter]

Way too optimistic by the looks, yep $4 Beagle. PS-Glad I bailed on a bad trade at $4.98. PPS-Put a cheeky bid on at $3.80

Wow - already 80 cents already down. Your $3.80 might not be that cheeky anymore ;); I guess if this was the last downgrade from them, than you get the shares for a reasonable price. If it is not - who knows?

[bull....]

retail margins impacted forecast the most , i would say they are still uncompetitive on retail pricing so expect more pain to come as they l;ower pricing to sustain volumes

[couta1]

Looks like that $4.01 was a good entry unless we get Instos dumping once the news is digested.

[Maverick]

Yes , I think Beagle deserves full marks for his warnings on this one since their first downgrade.

maybe they should rip out their tanks and convert those prime highway locations into retirement villages.

[couta1]

Very good quick 30c trade for those who bought at the low and offloaded about now.

[Beagle]

Thanks guys.

I think the most interesting thing about the size and timing of this downgrade is that with previous guidance they said as long as retail margins don't deteriorate we're comfortable maintaining guidance.

Quite obviously the bulk of this current downgrade represents a further deterioration in expected retail margins over the peak summer driving period and perhaps represents a new even more intensely competitive environment than the company has ever previously experienced.

I think its highly likely things get even worse from here and annualising even the last quarter this year as the new normal for FY21 has serious implications for EDITDA and dividends payable going forward.

This continues to look like a classic dividend yield / apparent value trap to me. AVOID.

[Beagle]

https://www.msn.com/en-nz/money/news/under-the-pump-tough-trading-eats-into-z-energys-revenue/ar-AAK4D0Q?ocid=spartandhp

A word of caution with this one and anyone tempted to bottom pick or trade it. Balance is usually right when he says earnings downgrades come in three's.

[couta1]

https://www.msn.com/en-nz/money/news/under-the-pump-tough-trading-eats-into-z-energys-revenue/ar-AAK4D0Q?ocid=spartandhp

A word of caution with this one and anyone tempted to bottom pick or trade it. Balance is usually right when he says earnings downgrades come in three's. The only safe trade was off the open at $4.01 which I didnt take.

[flyer]

Yes, would have loved to pick some more up at $4.01. Still 10% yield at 40c Divi. Hard to say. I live right next door to one and it is busy all the time, more so than the Gull down the road.

[Beagle]

The only safe trade was off the open at $4.01 which I didnt take.

That's not a safe trade mate. This could easily go into the early- mid $3's or even significantly worse next year. Impossible to overstate the risks of pressure on fuel margins. If the Government get just one tenth of their estimated 18-32 cent, (mid point is one tenth is 2.5 cents per liter) reduction in margins ZEL's profit will be absolutely decimated as they only make 3.5 cents per liter after all costs and tax. Even if the Govt get one twentieth (1.25 cents per liter average) of their estimated savings at a retail price level, this is devastating for ZEL's operational profitability.

The potential for further significant falls in EBITDA for FY21, just from annualising the forecast margin in Q4 to a full year effect for FY21 is bad enough...then you start factoring in further margin compression from regulatory changes and this could get extremely ugly next year.

I haven't got a new price target...my nose is telling me to "STAY OUT" no matter how cheap this appears to be.

Might work out a no growth PE of 10.0 on real after tax earnings on EBITDA of $300m and see what that suggests is fair value. Can't use a yield model as its anyone's guess what future dividends will be.

Okay lets go there. My very early seat of the pants estimate of EBITDA for FY21 is just $300m with the expected tighter margins in Q4 FY20 annualised for full year effect in FY21 and some extra additional pressure to margins from the fuel price study, wholesale market transparency and premium fuel pricing display.

In FY19 there was $195m of costs below the EBITDA line so that implies about $105m before tax, ~ $75m after tax = 19 cents per share for FY21.
Pretty clear this is at very best a no growth company so put a no growth PE of 10 on that and you can get to $1.90 as fair value pretty easily if things keep going south like I think there's a good chance they will.

There is potential for this stock to head quite materially south from here in the foreseeable future.

[couta1]

That's not a safe trade mate. This could easily go into the mid $3's or even worse next year. Impossible to overstate the risks of pressure on fuel margins. If the Government get just one tenth of their estimated 18-32 cent, (mid one tenth is 2.5 cents per liter) reduction in margins ZEL's profit will be absolutely decimated as they only make 3.5 cents per liter after all costs and tax. Even if the Govt get one twentieth (1.25 cents per liter average) of their estimated savings at a retail price level, this is devastating for ZEL's operational profitability.

The potential for further significant falls in EBITDA for FY21, just from annualising the forecast margin in Q4 to a full year effect for FY21 is bad enough...then you start factoring in further margin compression from regulatory changes and this could get extremely ugly next year.

I haven't got a new price target...my nose is telling me to "STAY OUT" no matter how cheap this appears to be.

Might work out a no growth PE of 10.0 on real after tax earnings on EBITDA of $300m and see what that suggests is fair value. Can't use a yield model as its anyone's guess what future dividends will be. I think your mixing up your trading with long term holding there Beagle, in at $4.01 and out just after 11am at $4.30 ish would have been the way to go(Like a rat up and down a drain pipe)

[winner69]

Anybody bother to listen to the conference call.

Whatever a 20% drop in earnings in F20 is a bit of a disaster

Think management have been sucked in by their own glossy presentations and forgotten the basics of selling what is a commodity.

[winner69]

At this rate of earnings decline earnings won’t be much more when they were pre Caltex

Wasn’t there zillions in synergies they were going to capture.

[Beagle]

At this rate of earnings decline earnings won’t be much more when they were pre Caltex

Wasn’t there zillions in synergies they were going to capture.

As recently as May last year, see page 4, (they were describing themselves as among other things a "Growth Company"), and not just in this presentation either. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ZEL/335097/300554.pdf

Some of the "creative talk" in their presentations is very corrosive to senior management's credibility. I take whatever they say with 101 grains of salt now...

Suppose the new CEO of SKY thinks they're going to turn themselves around into a growth company too. How's that working out for them so far...

[winner69]

As recently as May last year, see page 4, (they were describing themselves as among other things a "Growth Company"), and not just in this presentation either. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ZEL/335097/300554.pdf

Some of the "creative talk" in their presentations is very corrosive to senior management's credibility. I take whatever they say with 101 grains of salt now...

Suppose the new CEO of SKY thinks they're going to turn themselves around into a growth company too. How's that working out for them so far...

Need to ramp up the coffee, pies and sweet sales methinks

That’ll solve the earnings problem

[Beagle]

Last time I checked store sales were up a whopping 10% so without that... :eek2:

[peat]

10901

only a third of a billion (approx.) to service on the NZDX

interim bal sheet says over a whole billion.

[dreamcatcher]

UBS - what terrible analysis BUY rating with $7.50 TP after saying "5th guidance Downgrade in 2 years"

Got my quota a few cents from the bottom and like ALL shares there are risks but ZEL still sells a needed product.

[bull....]

exactly , my point from above was too highlight they are currently experiencing margin pressure

the bull called it first and the trend of declining margins is continuing

[ananda77]

UBS - what terrible analysis BUY rating with $7.50 TP after saying "5th guidance Downgrade in 2 years"

Got my quota a few cents from the bottom and like ALL shares there are risks but ZEL still sells a needed product.
With you on that one: the more panic - the more you buy.
btw, have off loaded cen at 728, now waiting for the next panic to arrive
That's the game, if you can't get on top of fear, you'll
enter the market at the wrong time.
What I like is that ZEL was quick to react to the likes of Gull and is competing, unlike BP and Mobil, who seem to have not reacted at all so far. I have been a Gull customer a long time, but now switched to Z...simply better service at the Gull price.

[Beagle]

Its not panic in my opinion. Its the market quite logically reacting to a fundamental lowering of the profitability of their business model. Take care out there folks.

[couta1]

Looks like that $4.01 was a very good entry point, well done to those that took the opportunity, it's going to be at least a 30 yr sunset on this one.

[Beagle]

Very early days to call shareholders pain as being over.
Take care out there folks and remember this dog's motto "No if's and no but's, buy no mutts"

[Davexl]

Can't believe it. Morningstar on 13th Dec, putting a Buy recommendation on ZEL with the price valuation at $8.30! Is there any integrity to these valuations at all?

First post by the way, Vince kindly let me on board with my gmail address. Finally...:)

[dreamcatcher]

Can't believe it. Morningstar on 13th Dec, putting a Buy recommendation on ZEL with the price valuation at $8.30! Is there any integrity to these valuations at all?

First post by the way, Vince kindly let me on board with my gmail address. Finally...:)

Welcome aboard............

[Davexl]

Welcome aboard............


Thanks Dreamcatcher. Certainly got to enjoy a very nice dividend. Shame about the capital. Wondering whether to buy more when the price retests around the $4 mark or wait further / forever as Beagle seems to be suggesting. Perhaps "Sharktank" will increase market share over time? Any suggestions? Thanks guys...

[rayonline]

I sold all my Z shares at 4.85, due to the timing I also received the dividend.

[Davexl]

I sold all my Z shares at 4.85, due to the timing I also received the dividend.

Smart move rayonline. I wasn't expecting the margin compression from BOTH angles quite so soon. ZEL hopefully still finding some "synergies".

[dreamcatcher]

Smart move rayonline. I wasn't expecting the margin compression from BOTH angles quite so soon. ZEL hopefully still finding some "synergies".

I on the other hand increased my ZEL holdings @ $4.04 appears market divided yes/no so do whats best for you ..........

[Davexl]

I on the other hand increased my ZEL holdings @ $4.04 appears market divided yes/no so do whats best for you ..........

Thanks Dreamcatcher, would like to trust myself a bit more after all these years, but feel I need a bit more info on this one. Like ZEL's plans to respond to the Govt's report. Looks like more capital expense required in the medium term, eg new pipeline etc but need a better feel for the scale involved.

[Joshuatree]

Caltex in Aus giving up the Caltex brand and switching it to their own brand Ampol. Could Z dispense with the caltex brand to save money ,and amalgamate it to Z? Competition watchdog not allow it maybe.

Download Document 190.89KB (https://hotcopper.com.au/documentembed?id=uOMxKKzFkiWRTLKhOROKAxjvSDYL4ge4z xH0v%2FRt57FiGug%3D)

[macduffy]

Competition watchdog not allow it maybe.


Would hardly reduce competition to allow a company to re-brand its outlets, but stranger things have happened in the name of "competition"!

[flyer]

$1.32 for Unleaded in Adelaide last week although a BP was $1.72 so need to shop around.

[winner69]

Good to see ZEL acting fast to put prices up ......got to keep those profits up.

[Beagle]

Up faster than an Iranian ballistic missle. Disgraceful how ZEL almost always tries to lead the market higher.

[Jay]

use to be BP at one point, may be they take it in turns:confused:

However, the others usually follow shortly afterwards
Locally where I live, the Caltex station is the cheapest (usually 3 or 4 cents before any discounts) and that is owned by... hmmmm

[peat]

I'm not sure they are doing themselves a service with their nominal pricing.

Currently 224.9 here at Z with Gull 213.9 (just down the road)
But if you use the Z app you get 10c of that 11 differential. (so it says - I havent done it)
Given the Gull is the Speed Lane price (with their regular pump price 219.7) and Z is full service thats not too bad really.

[winner69]

Z say loyalty is key driver of market share ...not pump prices

[Beagle]

You guys have got it all wrong. Mobil have been spending on extensive advertising telling Kiwi's their fuel gives "advanced" fuel economy lol
Even says so on their website so must be true :D https://www.mobil.co.nz/en-nz/synergy-fuels

"Advanced" is quite a "bold" claim. Online dictionary cut and paste below...I'll leave it for you guys to decide if Mobil are being deliberately disingenuous or whether this is just within the bounds of normal creative marketing but its well worth noting they don't provide any independent studies to verify their "bold" claim.

advanced[ ad-vanst, -vahnst ]SHOW IPA
SEE SYNONYMS FOR advanced ON THESAURUS.COM

adjective
placed ahead or forward:
with one foot advanced.
ahead or far or further along in progress, complexity, knowledge, skill, etc.:
an advanced class in Spanish; to take a course in advanced mathematics; Our plans are too advanced to make the change now.
pertaining to or embodying ideas, practices, attitudes, etc., taken as being more enlightened or liberal than the standardized, established, or traditional:
advanced theories of child care; the more advanced members of the artistic community.
far along in time:
the advanced age of most senators.

[macduffy]

Perhaps I'm biased, as a small holder of ZEL, but I get a lot of chuckles from reading wealthy Sharetrader gurus agonising over a few cents per litre every time one or other of the retailers ups the price!

:ohmy:

[winner69]

Been super beneficual to be using Z sharetank of late. Those living in Wellington get Petone prices and get 34 cpl discount on petrol

Suppose Z know what they doing with all their amazing customer data stuff and algorithms

[Davexl]

Been super beneficual to be using Z sharetank of late. Those living in Wellington get Petone prices and get 34 cpl discount on petrol

Suppose Z know what they doing with all their amazing customer data stuff and algorithms

Not reflected in today's share price which could be being dragged down by Aust market and in turn by US on late Friday.

Also Bull had this to say:

from z statement today

The contractual arrangements that Z has with the New Zealand
Refining Company (NZX: NZR) means we havea ‘floor’ in the
processing fee that we pay to the refining company. Third party
forecasts regularly provided toZ estimate that during 4QFY20
refining margins will drop below the ‘floor’ level and may
require Z to ‘top up’the refining company
bull

[bull....]

not surprised diesel sales well down , govt's new taxes on diesel make it more expensive than petrol now

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ZEL/347375/315549.pdf

[Beagle]

Caltex retail petrol sales down just on 20% is quite a remarkable decline given most people have reasonable entrenched habits regarding fuel purchases.
Margin's look under pressure too and refining margin ahs taken a huge hit.

This is the bottom and it gets better from here or is the trend definitely NOT your friend...that's the $64,000 question.

[winner69]

Caltex retail petrol sales down just on 20% is quite a remarkable decline given most people have reasonable entrenched habits regarding fuel purchases.
Margin's look under pressure too and refining margin ahs taken a huge hit.

This is the bottom and it gets better from here or is the trend definitely NOT your friend...that's the $64,000 question.

At least it wasn’t a profit downgrade

But downgrades often follow reaffirmation

FY - I have no idea ...doubt they know either

[BlackPeter]

... given most people have reasonable entrenched habits regarding fuel purchases ...


Absolutely. My habit is to purchase fuel always where I can get it most economically (considering fuel price and cost of access). If possible I try to avoid as well any complicated discount schemes and prefer an honest and good price to rebate schemes with endless conditions attached. I suppose I am not the only one.

[Beagle]

At least it wasn’t a profit downgrade

But downgrades often follow reaffirmation

FY - I have no idea ...doubt they know either

Good they dangle that 40 cps annual fully imputed dividend out there so dividend hounds will be pleased they can get 40 / 0.72 = 55.56 cps gross so at $4.70 that's a gross yield of 11.8% The problem is its literally anyone's guess whether that's sustainable or not.
For what its worth last time I made a foray into ZEL the forward yield was 15% gross. I didn't think I could lose there and didn't.
For the shares to give a 15% yield with the current dividend forecast they'd need to be 55.56 / 0.15 = $3.70

I'm happy to watch this one from the sidelines at this stage.

[Jay]

Filled up yesterday with Pak N save voucher - same price as local Caltex (usually cheaper - before the standard discount) and was closer to where I was.

Then in my email last night there is 10 cent discount for today (quite often on wednesdays) - however needed it yesterday, the light has been on for a day and a bit already!

[peat]

The problem with sharetank is that you dont get any discount so there is a disincentive to use it.
I bought 100 L to check it out and I was a bit disappointed quite frankly that I had to pay the full pump price.
Only use I can think of is if I was forced to refill in Wellington, or Auckland or if I was sure petrol is going up a lot.

I agree though that it is kind of pathetic angling for a few cents here and there on the price to save a few dollars. Think of it as us as aiming for perfect competition in the true economic sense ;+)

[dodgy]

I'm not sure they are doing themselves a service with their nominal pricing.

Currently 224.9 here at Z with Gull 213.9 (just down the road)
But if you use the Z app you get 10c of that 11 differential. (so it says - I havent done it)
Given the Gull is the Speed Lane price (with their regular pump price 219.7) and Z is full service thats not too bad really.

Good morning all,
Please correct me, but my understanding is that "Gull" add biofuel or ethanol to their gas, that explains the price difference - at 1 stage it was the different tax rates for petroleum vs bio and if this is the case my experience shows a perceived worse experience in the car.
-dodgy

[iceman]

The problem with sharetank is that you dont get any discount so there is a disincentive to use it.
I bought 100 L to check it out and I was a bit disappointed quite frankly that I had to pay the full pump price.
Only use I can think of is if I was forced to refill in Wellington, or Auckland or if I was sure petrol is going up a lot.

I agree though that it is kind of pathetic angling for a few cents here and there on the price to save a few dollars. Think of it as us as aiming for perfect competition in the true economic sense ;+)

Agree with this Peat. I've been trialing Sharetank but it is a disappointment. Much better to use the app for "pumped" and "stacking" when they have a good offer on. The only reason I use Sharetank is that we allow our poor daughter at University to use my Sharetank.

[Beagle]

Good morning all,
Please correct me, but my understanding is that "Gull" add biofuel or ethanol to their gas, that explains the price difference - at 1 stage it was the different tax rates for petroleum vs bio and if this is the case my experience shows a perceived worse experience in the car.
-dodgy
My understanding is their 91 does not contain biofuel or ethanol but their 98 Octane does as its used as an octane enhancer. I understand their 98 effectively contains about 3% less energy with the addition of the ethanol so before using it one needs to check their vehicle is compatible with E10 (a 10% enthonol content) and one will use about 3% more fuel to do the same amount of work as if they filled with Mobil or BP98 Octane so you'd want about a 7 cents per liter lower price (compared to the discounted price of Mobil or BP) to use this fuel. Peak engine output will be 3% lower too.


Agree with this Peat. I've been trialing Sharetank but it is a disappointment. Much better to use the app for "pumped" and "stacking" when they have a good offer on. The only reason I use Sharetank is that we allow our poor daughter at University to use my Sharetank.
I've got one of those at Uni as well. Thanks for the reminder. This might be a good way to provide supplementary support.

[Grimy]

My understanding is their 91 does not contain biofuel or ethanol but their 98 Octane does as its used as an octane enhancer. I understand their 98 effectively contains about 3% less energy with the addition of the ethanol so before using it one needs to check their vehicle is compatible with E10 (a 10% enthonol content) and one will use about 3% more fuel to do the same amount of work as if they filled with Mobil or BP98 Octane so you'd want about a 7 cents per liter lower price (compared to the discounted price of Mobil or BP) to use this fuel. Peak engine output will be 3% lower too.

Correct. Most vehicles are okay with up to 10% ethanol. But your Owner's Manual will tell you (or the manufacturer's local distributor). Certainly pays to check prices as Gull often isn't cheaper when factoring in loyalty discounts - and that's 91 which is an easy comparison. As you say, you have to factor in the slightly worse fuel consumption with Gull's 98. Having said that, almost anywhere is going to be cheaper than BP's 95 and 98 out West Auckland.....

[Grimy]

I often end up buying Mobil for 91 and Z for 95 out this way (West Auckland). But you have to keep your eye on Gull Portage Rd, they are up and down like a yo-yo and can be the cheapest by miles (kms?) some days.

[Beagle]

Correct. Most vehicles are okay with up to 10% ethanol. But your Owner's Manual will tell you (or the manufacturer's local distributor). Certainly pays to check prices as Gull often isn't cheaper when factoring in loyalty discounts - and that's 91 which is an easy comparison. As you say, you have to factor in the slightly worse fuel consumption with Gull's 98. Having said that, almost anywhere is going to be cheaper than BP's 95 and 98 out West Auckland.....

Thankfully I now drive a vehicle that happy performs well on 91 Octane so I can dodge the extraordinary premium's being asked for 98 Octane.

[winner69]

That quarterly report of Z’s was pretty shocking really ....main takeaway continuing loss of share and that for last 4 quarters total Z volumes are down 7% on pcp while industry volumes down about 2% (allowing for Gull not included in industry volumes)

Reaffirmed guidance - that’s good - but I reckon the $350m-$385m had a lot of under promise over delivery in it when it was first announce. Things still not going to plan so I reckon the $350m-$385m has a lot of ‘hope like hell we make the $350m’ in it

[Beagle]

That quarterly report of Z’s was pretty shocking really ....main takeaway continuing loss of share and that for last 4 quarters total Z volumes are down 7% on pcp while industry volumes down about 2% (allowing for Gull not included in industry volumes)

Reaffirmed guidance - that’s good - but I reckon the $350m-$385m had a lot of under promise over delivery in it when it was first announce. Things still not going to plan so I reckon the $350m-$385m has a lot of ‘hope like hell we make the $350m’ in it

Really shocking I agree, and quite confronting to see Caltex petrol volume down a whopping 20% ! It does beg the very serious question if market share, margins and refining margins are under so much pressure in the third and forecast for the fourth quarter what does one think about their earnings prospects for FY21 ? Will we see a new low of $300 - $350m for FY21 ?

They lost market share in petrol, diesel, aviation, export...everything. Meanwhile what are they doing regarding their corporate overhead ? (given we appear to be past peak fuel consumption and heading down) ? Suppose its tough to cut corporate overhead when they have all those fancy investor presentations to prepare each year reminding shareholders its a growth company.

Throw in some new transparency required with a wholesale pricing regime and some new infrastructure demanded by the Govt to sure up supply of Jet fuel at Auckland airport and it starts to look very tough in FY21 to me. Well worth shareholders remembering how quickly and dramatically this company can change its dividends so serious caution is required when estimating what dividend might be sustainable on average going forward.

Is the current 40 cps annual dividend a classic dividend trap ?

[Antipodean]

Total all industry fuel volumes down 4.78% on pcp and Z group total fuel volumes down 5.62% so we are talking < 1% market loss all inclusive. Which is largely due to Caltex petrol dropping 19.28%. Z diesel is actually up 2.63% on pcp... while again caltex diesel dropping by 7.32%. So really Caltex is the let down at the moment.

Looking at retail (typically higher margin than fuel), there is a 7.41% increase in store only transactions. This is also reflected in average weekly store sales which are up 7.88% (6.99% like for like), which across 202 stations accounts to over $600k per week increase in spending just in the shop. Seems people are still looking for service and fuel, not just unmanned stations.

I'll believe peak oil consumption in NZ when I see the evidence, one contraction does not a trend make.

[winner69]

Total all industry fuel volumes down 4.78% on pcp and Z group total fuel volumes down 5.62% so we are talking < 1% market loss all inclusive. ............

Antipodean - Gull volumes not in industry volumes now ...so share loss greater than you state

from announcement, after allowing for Gull - Z estimates that total industry volumes declined by -1.8% year over year.

[peat]

why is one player not included in industry statistics.
defeats the purpose doesnt it?

[Beagle]

why is one player not included in industry statistics.
defeats the purpose doesnt it?

Ask Caltex Australia who own Gull.

[jg8512]

Ask Caltex Australia who own Gull.

all the majors (and the distributors and dealers they supply) get their fuel from the shared storage and NZ refining. the majors shared this data between themselves. so the majors have a real good handle on their respective shares by region, terminal, etc. but Gull is wholly separate - they import their own into Mt Mauganui and distribute to their stations and a few other clients they supply. the majors know less accurately what Gull has imported and sold. From the majors' perspective, in many counts, the whole system worked better before Gull got involved.

[winner69]

Is this Z pleading poverty and ‘looking’ for support

All that discounting and market share still trending down ....hmmm

https://www.stuff.co.nz/business/119057444/z-energy-counting-the-cost-of-petrols-unmanned-effect

[peat]

Is this Z pleading poverty and ‘looking’ for support

All that discounting and market share still trending down ....hmmm

https://www.stuff.co.nz/business/119057444/z-energy-counting-the-cost-of-petrols-unmanned-effect

but it also supports the view that they were ripping off the market earlier when there was less competition. so Jacinda was right about fleecing.
And it also shows that the free market will attend to destroying super profits (over time)

[Beagle]

Is this Z pleading poverty and ‘looking’ for support

All that discounting and market share still trending down ....hmmm

https://www.stuff.co.nz/business/119057444/z-energy-counting-the-cost-of-petrols-unmanned-effect

Prognosis is grim. When the loyalty scheme changed from August ? 2019 Z for the first time allowed the "stacking" of discounts and I predicted this would lead to a significant impact on their margins and sure enough its happened. There's been a massive move up from about 8 cents per liter average discount to roughly double that level now.
Its simple enough to sign up to their email reminder system and they let you know when they have their 10 cent off days. Buy just $40 of petrol and stack your 10 cent discount each time and effectively you get $5 off (10 cents a liter stacked for future purchase of 50 liters) that $40 or effectively a 12.5% discount off each $40 purchase. 12.5% off is effectively as much as 28 cents per liter (at $2.259 per liter) when you use all that stacked discount later, although it is somewhat ameliorated because to claim the discount you need to buy 50 liters and at that time you only get 10 cents per liter off.

I only drive modest mileage and find its typically quite easy to get $1 per liter off when you use your stacked discounts to purchase 50 liters every second month.
I think their discount will get slightly worse from here through this stacking thing as people get more used to taking maximum advantage of it, and more discounting from having to compete with unmanned stations and they are probably shooting themselves in the foot a bit with this new sharetank as well.

Despite this stacking thing the way Caltex in particular has lost market share with its petrol sales is really quite confronting.

[winner69]

Beagle - bit of a worry when a CEO says ‘Rather than abandon the 'nice coffee-clean toilets-forecourt service' model Z was founded on, Bennetts says the company is trying to introduce a range of discount products for its more price-conscious customers. ’

So nice coffee and clean toilets AND A DECENT DISCOUNT.

It all seems rather confusing from a making money perspective

[Beagle]

Looks like we're past "peak fuel" too and with a wide range of new and hopefully more affordable electric vehicles coming onto the market over the next few years along with the N.Z. Govt incentive for EV's of as much as $8,000 each, and with more and more unmanned stations coming on stream its more difficult to see the investment case as being worthwhile.

Suppose they could find another electricity minnow to throw a quick $50m at and that might be the panacea of all their problems :)

If I was running ZEL I think the best way to confront the EV thing is to install fast chargers at ALL ZEL stations thereby leveraging significant amounts of coffee, snacks and ice-cream sales while EV owners charge their cars up. There's going to be a chronic shortage of EV fast charging stations in the years ahead, mark my words.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12303658

Premium fuel prices set to come |under the pump" according to AA.
Been rorting motorists for the last decade !!

[Oliver Mander]

but it also supports the view that they were ripping off the market earlier when there was less competition. so Jacinda was right about fleecing.
And it also shows that the free market will attend to destroying super profits (over time)

I think this is the point peat. I was involved in this industry at the time when Challenge & Gull entered, and when we were worried about others. At the time, the company I worked for responded, and its never looked back - maintaining its low cost base regardless of margins. History is repeating tho - increase in margins has attracted newcomers, with the added bonus of the majors scrapping it out for wholesale supply (this is a strong evolution of the market since the 1990's). Z is caught in no man's land - instead of building diversification by expanding out of NZ, they paid top $ for Caltex, have a high cost base compared with its fellow majors (BP, Mobil) and its smaller competitors and have seen margins erode as everyone scraps for market share. I hope they have a 'transformation' plan; they'll need it. I think things will get worse before they get better (although I do think things will eventually get better).

[Beagle]

I think this is the point peat. I was involved in this industry at the time when Challenge & Gull entered, and when we were worried about others. At the time, the company I worked for responded, and its never looked back - maintaining its low cost base regardless of margins. History is repeating tho - increase in margins has attracted newcomers, with the added bonus of the majors scrapping it out for wholesale supply (this is a strong evolution of the market since the 1990's). Z is caught in no man's land - instead of building diversification by expanding out of NZ, they paid top $ for Caltex, have a high cost base compared with its fellow majors (BP, Mobil) and its smaller competitors and have seen margins erode as everyone scraps for market share. I hope they have a 'transformation' plan; they'll need it. I think things will get worse before they get better (although I do think things will eventually get better).

For ZEL they better not get much worse because they reckon net margin is only 3.5 cents per liter. BTW - I noticed your article in the Herald on the weekend, well written mate.

[Beagle]

Thanks Dreamcatcher. Certainly got to enjoy a very nice dividend. Shame about the capital. Wondering whether to buy more when the price retests around the $4 mark or wait further / forever as Beagle seems to be suggesting. Perhaps "Sharktank" will increase market share over time? Any suggestions? Thanks guys... From mid December

Get out while you can. The way this is shaping up EBITDAF could be < $300m for FY21, down from $350-380m in FY20 :eek2:

Another earnings downgrade for FY20 to come shortly ?

[winner69]

Sylvester - Seems the Z ‘transformation plan’ is selling more pies, coffees and sweets

[Oliver Mander]

Sylvester - Seems the Z ‘transformation plan’ is selling more pies, coffees and sweets

Which is not a bad plan in and of itself. But I think that "premium food offer" space is taken already by the green and gold one. And I can't see them saying "help yourself" to Z. Also, that doesn't address the cost base issue associated with either selling fuel or managing the shops...staff numbers seem high relative to the other majors. I get the focus on customer needs; but there is a balance with efficiency, especially in what is essentially a commodity fuels market. Even in that space, BP and Mobil have 98 octane to differentiate themselves a bit.

Beagle mentioned 3.5 cpl net margin. Even that is relatively high compared to what was going on when BP and Shell were slugging it out in the late 90's - 2000's. That period was not good for the industry (no investment possible), but it did shake out the weaker players (eg, Shell, then Caltex). Given that history (admittedly, experiential bias on my part), downside risk still seems quite high to me.

[Oliver Mander]

BTW - I noticed your article in the Herald on the weekend, well written mate.

Thanks Beagle!

[Beagle]

I agree SylvesterCat, BP's food offer is quite substantially better than ZEL and I have never understood why ZEL or Caltex have never had 98 Octane when many higher performance European cars require this fuel. Go figure ? Its like they have their head in the sand in this regard. ZEL have been the least extreme in their "milking" of motorists with the premium they've asked for 95 Octane but with price display coming its clear that further pressure is coming on their 95 Octane fuel margin. Just annualising apparent forecast 4th quarter margin's gives an interesting heads-up into possible earnings downside for FY21. Start factoring in reduced margins from premium fuel, ever increasing competition for the unmanned minnow station players, Govt action of wholesale pricing and requirements for increased jet fuel storage at Wiri and the steady roll-out of EV's, I agree 100%, the downside risk looks quite significant.

More concerning as you suggest is their cost structure and I really don't think one can rely on management to be proactive in cutting their cloth to suit the new reality that appears to be rapidly unfolding. Management have a history of "shocking" the market with downgrades both to earnings and dividends so anyone relying on 40 cps fully imputed annual dividends is taking a big risk as to its sustainability.

I can easily foresee that 3.5 cpl margin coming down to ~ 2 cpl in FY21.

[pierre]

Surely the Oil companies will just raise the price of 91 to cover the reduction in the current gains from premium fuels.
I doubt they will be very interested in taking the pain themselves.
They've never been renowned for philanthropy.

[Beagle]

Surely the Oil companies will just raise the price of 91 to cover the reduction in the current gains from premium fuels.
I doubt they will be very interested in taking the pain themselves.
They've never been renowned for philanthropy.

Yes, but, unmanned stations from the minnows will keep the pressure on. Whichever brand is first to differentiate themselves from the market by offering fast charging stations for EV's across most of their branch network will gain a significant first mover advantage. I wouldn't back ZEL's current management to be bright enough to realise this. BP probably better positioned anyway with their superior food and drink offer as early EV adopters are likely to be fairly well off and respond better to BP's more premium in store experience while waiting for their EV's to charge up.

[Oliver Mander]

Surely the Oil companies will just raise the price of 91 to cover the reduction in the current gains from premium fuels.
I doubt they will be very interested in taking the pain themselves.
They've never been renowned for philanthropy.

The margin history over the last 30 years shows a broad cycle - including long periods where the industry has actually taken on quite a LOT of pain on behalf of consumers (not that joe public cares; if prices are the same there is no competition and if prices are different there its confusing and anti-competitive). Historically, margins creep up to super-profit levels; followed by new entrants; followed by "slash and burn", where only the most efficient make any $; followed by margin increases again. Trick is to maintain a best-in-class cost structure through all of the cycles, while giving a great customer experience at all times.

[Beagle]

Interesting you talking about cost structure today SylvesterCat. One thing many people will not know is that Caltex have sold off a lot of their stations to franchisees and the lease obligations on them have been assigned accordingly, however ZEL still retain a contingent liability as the original party to enter into that lease should the franchisee get into financial difficulties.

One wonders with Caltex market share shrinking so much if some of those franchisees might fold up and those leases sheet back home to be an obligation of ZEL again...

[BlackPeter]

Interesting ... I see on marketwatch (https://www.marketscreener.com/Z-ENERGY-LTD-14473098/financials/) that stock market analysts significantly downgraded their future earnings estimates for ZEL, however without changing their expectations re dividends which would be then from 2020 to 2022 each year higher than the respective earnings. Just wondering whether they considered how sustainable this policy might be?

I note as well that the consensus recommendation (7.92/10 i.e. slightly above outperform towards buy) has not changed.

https://www.marketscreener.com/Z-ENERGY-LTD-14473098/consensus/

Beats me.

[Beagle]

Depreciation in their branch network is a non cash charge and they're not investing in any new stations, (recognising this is a sunset industry) which enables them to pay out more than they earn but eventually this begs the question as to whether future dividends will be fully imputed.

I don't see the recovery in EBITDA that the analysts see and seriously doubt future dividends will be at the level forecasted. For one thing there's significant capex that the Govt is demanding in terms of a major expansion in jet fuel storage at Wiri. They have threatened to legislate if the companies don't build more resiliency into the supply of jet fuel voluntarily. Even if earnings do recover as analysts are forecasting the forward PE looking out to FY21 and FY22 is not especially attractive for a no growth sunset industry company.

[Timesurfer]

Depreciation in their branch network is a non cash charge and they're not investing in any new stations, (recognising this is a sunset industry) which enables them to pay out more than they earn but eventually this begs the question as to whether future dividends will be fully imputed.

Not investing in new stations because this is a sunset industry seems a little short sighted?
Given that the capital cost invested in a few underground tanks and some pumps is relatively minimal, owning land is never a bad thing (unless you are predicting that land values will not continue to increase), which is why the non manned operators are still flat out investing in this sunset industry I would imagine. I can't see it falling over in the next 7 years which is historically the average time it takes to double your money on the land investment.

[macduffy]

Do the non-manned operators own the land or do they lease it? Z too, for that matter?

[Timesurfer]

I believe they do both.

[Davexl]

Do we have information on Sharetanks effects since November last year when everyone was gung-ho about getting around the Auckland fuel tax, and Wellingtonians were filling up in Petone. I seem to remember something about loss of market share, but wondering if this situation is likely to turn around anytime soon?

Have liquidated some of my holding after Beagles PUBLIC SELL signal, (costing me money in the short term!) but am debating about keeping some if market share improves.

[King1212]

Not looking good for Z...
https://www.cnbc.com/2020/01/30/royal-dutch-shell-earnings-q4-2020.html

[Oliver Mander]

To be fair, Shell is a very different company to Z. Low oil prices are bad for Shell as their exploration arm sells oil.

On the other hand, as Z purchases refined product (made from oil), lower oil prices are generally good for Z as they carry less $ in inventory and might be able to squeeze a bit more margin from it.

Z has no exploration. While Shell has a marketing arm (like Z),that has a far more stable earnings profile, compared to selling oil. So you can't take anything from the Shell result to apply locally.

[King1212]

https://i.stuff.co.nz/business/119002073/aa-expects-price-drop-as-z-bp-and-mobil-move-to-display-price-of-premium-fuels?cid=facebook.pos

Here we go.....petrol is going down...motorists are going to benefit from it as well as transportation companies..not AIR..as virus impacted badly

[bull....]

the writing is on the wall

Electric dream: Britain to ban new petrol and hybrid cars from 2035
https://www.reuters.com/article/us-climate-change-accord/electric-dream-britain-to-ban-new-petrol-and-hybrid-cars-from-2035-idUSKBN1ZX2RY


another country going that way , nz will follow at some stage

[BlackPeter]

the writing is on the wall

Electric dream: Britain to ban new petrol and hybrid cars from 2035
https://www.reuters.com/article/us-climate-change-accord/electric-dream-britain-to-ban-new-petrol-and-hybrid-cars-from-2035-idUSKBN1ZX2RY


another country going that way , nz will follow at some stage

Well, yes - but its still 15 years and at least 3 elections to go. Always a bit reluctant to believe in goals somebody else far in the future will be responsible to enforce and many governments in between can change.

As well - Brits have hardly any leverage left to tell the car industry what to do ... hardly any British cars left (are there any left which don't belong to some foreign car manufacturer?) The still remaining car factories in little England will be moved quite soon to the continent ... and the English people can use the pushbike (if they are still able to design such a high tech thingee) if they don't like what others are producing.

But don't misunderstand me - I think it would be good to phase out the combustion engine ... its just that the Brits are the last people with the leverage to do it. Just like the governments of NZ or Fiji to pick some other examples. They all are followers with very little economic leverage ...

[mcdongle]

Its all to do with emissions...And large fines for car companies if they cant comply....

https://europe.autonews.com/automakers/how-automakers-plan-avoid-co2-fines-europe

[flyer]

Thought this was in recovery mode until today. My local one has ques lining up yesterday just to get that 10c a liter off, was crazy busy.

[bull....]

Thought this was in recovery mode until today. My local one has ques lining up yesterday just to get that 10c a liter off, was crazy busy.

probably to do with NZR announcement and Z having to cough up money now to NZR

[peat]

Fuel majors to be required to publish wholesale prices

https://businessdesk.co.nz/article/fuel-majors-to-be-required-to-publish-wholesale-prices (paywall)




Though I didn't think this would be such a big negative itself so it is probably a combination of things.

[Beagle]

NZR result was a shocker AND very weak margins persisting for the first 2 months of 2020 and I would think likely to persist for some considerable time with this virus hosing down demand for all grades of fuel including aviation.

Pretty sure ZEL's most recent downgrade assumed the recovery of refining margins in early 2020 so the possibility exists of yet another downgrade for ZEL. Wholesale price publishing had a serious effect on margins in Australia, same to happen here ?

We still have the major capex announcement to come on improving the robustness of the Jet fuel storage at South Auckland to come and the costs involved in that and of course lets not forget ZEL will be selling heaps less jet fuel with so many airlines reducing capacity...

On the bright side, (thankfully there is one), with the record run of hot dry weather in the North Island I am sure ZEL would have been selling heaps more ice-creams than last year so shop sales will be up.

[theace]

Is this starting to look like its bit oversold now!

[winner69]

A company with a social conscience

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ZEL/349230/317932.pdf

[peat]

A company with a social conscience

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ZEL/349230/317932.pdf


read: we are thoroughly relieved that we are not excluded from super funds coz that would be the absolute death of us.

[bull....]

bit of a joke if they were excluded

[bull....]

oil just plunged to 32$ per barrel at the moment be expecting my petrol to drop big time shortly

[winner69]

oil just plunged to 32$ per barrel at the moment be expecting my petrol to drop big time shortly

Is low oil prices good or bad for Z?

This is when they need to ‘normalise’ the accounts

[Beagle]

Bad from memory...there's some sweet spot of about $50-60 a barrel apparently, again, from memory.

[winner69]

Oil goes up petrol goes up at the pump overnight .....oil goes down and prices take a while to gondown at the pump

The Z spin machine says -

@zenergynz
Spin machine here! It hasn't dropped b/c markets haven't settled - we don't want to be passing through wild price swings (what if it goes back UP by that much in near future?). I can tell you that we've continuously reduced our prices across all our sites over the past few wks.

[Beagle]

Oil has been down for weeks before the massive collapse overnight. The price gouging just goes on and on at my closest Z where they still want $2.269 for 91 Octane, the same price they did weeks ago when oil began falling. Blatant highway robbery.

Part of me is hoping for a complete lockdown because of the virus so the highway robbery comes to an abrupt halt !

[peat]

Oil has been down for weeks before the massive collapse overnight. The price gouging just goes on and on at my closest Z where they still want $2.269 for 91 Octane, the same price they did weeks ago when oil began falling. Blatant highway robbery.



The NZD has been falling for weeks as well so that unfortunately counteracts petrol becoming cheaper for us due to falling oil prices.
However the kiwi has risen the last couple of days so surely with oil plummeting there should be some cheaper petrol soon.

[stoploss]

The NZD has been falling for weeks as well so that unfortunately counteracts petrol becoming cheaper for us due to falling oil prices.
However the kiwi has risen the last couple of days so surely with oil plummeting there should be some cheaper petrol soon.
NZD down 7 % ish oil down 45% ish , Peat do you really think this company that holds itself as a “ good nz company “ is doing the right thing by us ?

[winner69]

NZD down 7 % ish oil down 45% ish , Peat do you really think this company that holds itself as a “ good nz company “ is doing the right thing by us ?

Bennett said on radio this morning Z take into account ALL STAKEHOLDERS when setting prices ...mentioned shareholders first.

He’s doing a good job looking after shareholders dividend