Wednesday 14th August 2013
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Investors would be better to wait until after the Z Energy float to buy shares in the petrol station chain as volatility in the sector means the price is likely to slip in the future, according to research house Morningstar.
Z Energy, owned by infrastructure investor Infratil and the New Zealand Superannuation Fund, will list on the New Zealand stock exchange on Monday, with the issue price via a book build expected to be between $3.25 and $3.75 a share. That is higher than the $3 fair value calculated by Morningstar senior resource analyst Mark Taylor.
"Volatility in the sector, often driven by the swings in fortune of large and irregular shipments of crude and refined products required, means there is a good chance of a better entry price at some time in the future," Morningstar's Taylor said in a research note. "Don't subscribe to the share offer, better entry opportunities may present later."
The bookbuild to set the share price is scheduled to start tomorrow. The offer is made up of a retail offer to broking firms and staff and an institutional offer. There won't be a public pool.
Z Energy's listing allows Infratil and the NZ Super Fund to realise a portion of their investment in the assets they bought from Shell three years ago. The investors, who currently each own a half stake in Z Energy, will retain a combined 40 percent to 50 percent in the listed company.
"Z has many favourable attributes that will make it an attractive investment at the right price," said Morningstar's Taylor. "But at the end of the day, this is a risk/reward game, and the vendors are likely to be taking their rewards for risk, and then some."
Taylor said his fair value estimate for the shares suggests a high fiscal 2014 dividend yield of 7.3 percent, reflecting relatively benign economic conditions and an unsustainable 84 percent payout ratio.
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