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.
Printable View
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.
Ditto, me too.
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%.
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.
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.
Attachment 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.
Yes appreciate your thoughts Beagle, but please, go out and enjoy some sunshine on this lovely weekend day
Be Greedy when others are Fearful.
We have takeoff
Shareprice wont be this low again ...maybe never
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.
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...
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.
Between $4.85 and $5 looks the likely trading range IMO.
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?
Looks like an accurate depiction of the fairly grim state of affairs.
Your last point is the $64,000 question ?
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 ...
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.
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.
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.
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.
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
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.
Going well today ....share price over 5 bucks by end of day I hope.
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.
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
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.
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 ?
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/117...how-to-improve
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
https://www.nzherald.co.nz/business/...ectid=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.
Z are going to release a statement - conference call this afternoon
"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.
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.
the stickers on fuel caps will bring the price down lol
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.
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.
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/117...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/...ectid=12291251
"Prime Minister Jacinda Ardern is the fleecer-in-chief," Bishop said."
Point being fuel cards apparently have lead to higher margins ....the thing AA moan about
From the 589 page report
"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.
Exactly. Trouble is coming with the profitability of ZEL as sure as night follows day...
https://www.nzherald.co.nz/business/...ectid=12291165
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.
https://www.nzherald.co.nz/business/...ectid=12291391
Would love to see Z goes broke.. bloody fuel is always more expensive than others
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.
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 ?
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 !
Give her time.
https://www.msn.com/en-nz/money/busi...cid=spartandhp
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-heral...nder-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"
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.
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 ?
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 ?
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!
It wouldn't be a difference in tax rates, would it?Quote:
Something has gone wrong clearasmud.
;)
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?
This is one HUGE EARNINGS DOWNGRADE ......along with a likely 20% cut in expected dividend
http://nzx-prod-s7fsd7f98s.s3-websit...952/313959.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
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,
Good old Beagle..has a magic nose that can even sniff a black truffle in the forest....
Losing a prime wellington spot here, this is always pretty busy .
https://www.stuff.co.nz/business/118...-in-wellington
Heading for $4.50 as a few of us thought it would.
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.
pe looks very high
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
Looks like that $4.01 was a good entry unless we get Instos dumping once the news is digested.
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.
Very good quick 30c trade for those who bought at the low and offloaded about now.
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.
https://www.msn.com/en-nz/money/news...cid=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.