Ampol (ALD): This morning (27/04/2023) ALD gave a quarterly trading update, which confirmed why we own the stock. Our Atlas Guided Portfolios hold various weightings to ALD, though constantly remains as one of the largest overweights.

 Key Points:

  • Second strongest quarter on record: ALD saw exceptionally strong earnings growth +82% to $345M, setting the company up for a solid result in August. Refining continues to shine with margins at US$14.90 per barrel compared to last year’s US$10.59 per barrel; it is amazing that only in May 2021, Ampol and Viva (the two remaining refiners in Australia) extracted a $1.8 billion package from the Federal government to remain open!
  • Opening Economy = Increased Fuel Sales: Group total fuel sales rose by 50%, though this includes Z-Energy and international sales. Excluding these, base fuel volume increased by 14% due to increased mobility post-COVID lockdowns and the ongoing recovery of the aviation sector.
  • Why is the stock flat: Markets largely ignored this update today and focused on dampening global demand for refined hydrocarbons, but it is clear that Ampol is firing on all cylinders.

Portfolio Strategy: ALD is the core energy exposure in the Portfolio but with greater exposure to fuel retailing rather than the vagaries of the oil price. Over the past five years, ALD  has changed itself from a capital-intensive business with volatile earnings dependent on global refining margins to one increasingly based on fuel and convenience retailing and bringing franchised service stations in-house. The return of suitors EG or ACT would be positive share price catalysts, especially with the government underwriting refining profitability and giving the company $125 million to improve their assets to produce ultra-low sulphur petrol.

ALD trades on an undemanding = 9x forward earnings with a 6.9% fully franked dividend yield.

ALD was flat at $31.03 at end of day (27/04/2023).