IC Market Espresso 25 Sep 2020

 
The Slovenian Government Approves the Liberalization of Retail Fuel Prices

Such news was definitely welcomed by PETG investors as the company’s share price reached as high as EUR 325 per share during yesterday’s trading session.

The Slovenian government has approved the liberalization (deregulation) of retail fuel prices which has been regulated since 2016. It has not been announced when the mentioned decision takes effect, but the current decree on administered prices expires at the end of September (next Wednesday).

Pricing of petroleum products in Slovenia (up until now)

The prices of petrol and diesel fuel at motorway and expressway service stations have been liberalised and determined by the market, while the prices of petrol and diesel fuel at other service stations were up until now regulated.

On 27 March 2020, the Government of Republic of Slovenia adopted a new Decree on Setting Prices for Certain Petroleum Products, which shall remain in force until 30 September 2020. The pricing method for regulated petroleum products remained unchanged also under this decree. The model-based margin was government-regulated at most service stations and stands at EUR 0.08701 per litre of NMB-95 petrol and EUR 0.08158 per litre of diesel fuel.

How does this affect Petrol?

The mentioned liberalization will likely lead to raise in the fuel prices, which would in result mean improved margins for Petrol Group. As of H1 2020, the Group’s gross margin stood at 11.7%, EBITDA margin stood at 4.2%, while profit margin stood at 1.2%. It important to add that in 2019 gross margin for petrol was 32% lower in Slovenia compared to the EU average, while the margin for diesel was 45% lower. One should also note that in 2019 EBITDA which came from fuel sales app. amounted to EUR 108m, while Slovenian market accounts for roughly half of that figure. Taking also into consideration the fact that Petrol accounts for 59% of all petrol sales in Slovenia, it is reasonable to expect a quite a positive effect on the company’s P&L.

The news was definitely welcomed by the investors as the company’s share price reached as high as EUR 325 per share during yesterday’s trading session. The share price ended up closing at EUR 320 per share, representing an increase of 6.31%. At the current share price, the company is traded at (trailing 12m) P/E of 7.8 and EV/EBITDA of 5.9.

As a reminder, in Q2 full impact of pandemic measures was evidence of Petrol’s business result, so sales dropped 41% YoY, while bottom line went into negative territory amounting to EUR 1.9m. Therefore, H1 results show significant deterioration compared to H1 2019 entirely due to Covid-19 crises outbreak that started to show its impact in the last two weeks of March 2020. In H1 sales are down 27.9%, while net income to majority decreased 51.9% to EUR 18.6m.

Valamar Riviera Publishes General Assembly Decisions

Valamar expects to generate about 30% of revenues in 2020 compared to 2019 and a positive EBITDA.

Valamar Riviera published the decisions of the General Assembly which was held yesterday. The company noted that they expect to generate about 30% of revenues in 2020 compared to 2019 and a positive level of operating profit. Valamar adds that the summer tourism season was off to a good start, but travel warnings issued by several countries during August restricted travel to Croatia which caused a major drop in arrivals in late August and the post-season.

The company expects that the tourism sector will continue to be affected by the crisis in 2021, while business normalization is expected in 2022 and 2023. Despite challenging circumstances, they add that Croatia has reaffirmed itself as a stable and desirable tourist destination and has the opportunity to quickly restore tourism activities next year even though business will still be affected by the crisis. Valamar has thus far invested HRK 6bn in tourism. In the following period Valamar will be focused on maintaining liquidity, protecting employment, adjusting to conditions caused by the crisis and preparing projects for future growth and development.

Valamar further states that they have actively managed the crisis during 2020 to achieve long-term business sustainability with the support of key stakeholders. The “Pause, Restart” program ensured job protection facilitated by government measures and supported by social partners. By adjusting business operations and with the support of shareholders, banks and other investors, Valamar has secured liquidity to weather the crisis over the next three years. The “Pause, Restart” Program will continue with the aim of protecting employment until the start of next season and the interim period will be used to intensify preparations for future development projects, digitalization and transformation for the next period of growth.

In response to the crisis caused by the Covid-19 pandemic Valamar postponed HRK 125m worth investments in 2020, the completion of which is mainly planned for the 2021 season. Due to the uncertainty of future business operations, Valamar delayed the construction of Valamar Pinea Collection Resort in Poreč and postponed other investment projects for 12 to 24 months.