If Viva Energy REIT’s 425 petrol station sites are worth $2 billion, what value should investors put on Caltex Australia’s 475 sites? And is that reflected in Caltex’s share price?

Caltex investors and analysts are seeking to answer those questions in the wake of Viva Energy REIT’s successful listing last week.

Credit Suisse analysts weighed into the debate on Tuesday morning. They ran the numbers and while there are plenty of moving parts, the bottom line was the Caltex’s sites were not getting valued in line with Viva Energy REIT’s IPO level.

“It is bizarre to us that Viva Energy REIT has provided an almost perfect comp for this part of Caltex’s business and yet when Viva Energy REIT was up >15% on debut we saw no positive read through into Caltex’s share price,” the analysts told clients on Tuesday morning.

Caltex valuation post theoretical service station REIT, according to Credit Suisse.
Caltex valuation post theoretical service station REIT, according to Credit Suisse.

“A $2bn value for Caltex’s sites would mean they account for almost 25% of the market cap. Surely this implied read through is positive?”

Credit Suisse said the question was whether it was Caltex’s job to capture the value that equity markets were not pricing, or should investors wake up to the infrastructure and property assets inside Caltex and re-rate the stock.

Either way, the analysts reckon Caltex should disclose more information on their non-fuel income, to help investors make up their own minds.

“Caltex could rightly argue that they can raise money cheaper than 5% [Viva Energy REIT’s capitalisation rate], have no need for capital, could benefit from rising valuations for the sites and that it is the equity market’s job to price the latent value in their infrastructure /property,” the analysts told clients.

“Shareholders may argue that TSR should drive all decisions and that selling part of your business on 20x EV/EBITDA, when you trade on 8x, will crystallise value others aren’t willing to pay for currently.”

It’s something Caltex investors are sure to run past management following the company’s half-year results on August 23.

Extracted in full from Australian Financial Review.