Caltex shares on watch after trading update and property IPO announcement

The Caltex Australia Limited (ASX:CTX) share price will be on watch after announcing a trading update and property IPO plans…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Caltex Australia Limited (ASX: CTX) share price will be one to watch on Monday following the release of an update on its trading and plans for its Convenience business.

Trading update.

According to the release, Caltex's Convenience Retail EBIT is expected to be in the range of $190 million to $210 million in FY 2019. This represents an increase of $20 million to $40 million over the first half of 2019 and has been driven by an improvement in fuel margin.

Also supporting its improved performance has been its refocus on retail fuel. This has led to market share gains through 2019, with continued growth in premium fuel market share. Total Convenience Retail fuels sales volumes are expected to be ~4.8 billion litres in 2019.

The company's CEO, Julian Segal, was pleased with its performance amid tough trading conditions.

He said: "Despite the softer conditions from ongoing Australian economic weakness, Caltex has continued to outperform our competitors in the retail fuel market by leveraging our fuel supply chain expertise and our high-quality retail network. We also recently opened our first Caltex-Woolworths Group Ltd (ASX: WOW) Metro store in North Ryde, which is another milestone in the execution of our retail strategy."

The company also revealed that its October Caltex Refiner Margin (CRM) was US$12.01/bbl, with October Caltex Singapore Weighted Average Margin (WAM) of US$15.61/bbl. The strong WAM conditions in October were partly offset by rising landed crude oil premiums and lower yields. This is typical in warmer months.

Property IPO.

Caltex also announced its intention to undertake an IPO of up to a 49% interest in 250 core Convenience Retail freehold sites.

Caltex advised that it would retain a majority interest in the freehold sites, which would be placed into a property trust. It would then enter into a long-term lease agreement over each site.

Management believes the proposed IPO will realise significant value for Caltex shareholders, while allowing it to maintain operational control of the company's core Convenience Retail network.

It is anticipated that the property trust will receive rental payments from Caltex of approximately $80 million to $100 million in the first year.

Mr Segal said: "Caltex is focussed on unlocking value in our portfolio for shareholders and the segmentation of our network following our Convenience Retail network review has allowed us to consider a range of options to release capital from our high-quality property assets."

"This includes realising the value of Caltex's core Convenience Retail freehold sites as well as the 50 higher value alternative use sites. We have had strong interest in the first tranche of 25 higher value alternative use sites that have been brought to market and we will provide further updates once this process has concluded," he added.

If everything goes to plan, the transaction is expected to complete in the first half of 2020.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why EML, GQG Partners, IGO, and Integrated Research shares are sinking today

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a strong gain. At the time of…

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why EOS, News Corp, Polynovo, and Pro Medicus shares are roaring higher today

These shares are starting the week positively. But why?

Read more »

A couple stares at the tv in shock, one holding the remote up ready to press.
Mergers & Acquisitions

Telstra share price climbs amid $3.4b Foxtel sale

Who is buying the Foxtel business? Let's find out.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Share Market News

Brokers say these ASX 200 growth stocks could rise 50% to 70%

Analysts think these shares could be dirt cheap and destined to generate big returns.

Read more »

Two people having a meeting using a laptop and tablet to discuss Seven West Media's balance sheet
Broker Notes

Why these ASX shares could be top SMSF options in 2025

Analysts are bullish on these high-quality shares. Let's find out why.

Read more »

The words short selling in red against a black background
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Smiling man with phone in wheelchair watching stocks and trends on computer
Share Market News

5 things to watch on the ASX 200 on Monday

A good start to the week is expected for Aussie investors. Here's what to watch.

Read more »

A businessman compares the growth trajectory of property versus shares.
Opinions

What's the outlook for shares vs. property in 2025?

The experts have put out their new year predictions...

Read more »