Earlier this month, we researched Ampol (ASX:ALD) in The Dynamic Investor and upgraded the shares to a BUY. We consider ALD to be an attractive play on the current volatility arising out of the Middle East conflict, given their leverage to refining margins is higher than producers’ leverage is to oil and LNG prices. Together with more appealing valuation metrics, we took a more positive view on the shares.

With the share price having gained +15% since our report, we consider whether current levels still present value.

About Ampol

Ampol (formerly Caltex Australia) is the largest integrated fuels company in Australia & New Zealand. The Company has four operating divisions:

1. Fuels & Infrastructure – Sources, imports, refines and distributes crude, fuels and lubricants to a diverse customer base, including retail and wholesale customers.
2. Convenience Retail – ALD operates 576 Company-owned retail sites across Australia. The Company’s convenience retail offering has been boosted by the recent acquisition of EG Australia. The acquisition has added ~480 sites with a strong presence on the east coast of Australia.
3. New Zealand – This division includes Z Energy (acquired in May 2022), which is one of New Zealand’s largest transport energy companies. It includes the Z and Caltex branded retail networks, and supplies and distributes fuel to commercial and wholesale customers.
4. Lytton Refinery (Brisbane) – The Lytton refinery has an extensive storage and distribution network that supplies ALD’s retail network.

Key Fundamental Drivers

Strong Underlying Trends in Fuels & Infrastructure

The Fuels marketing margin in FY25 benefitted from: i) A high grading of the fuel mix, ii) Continued rational pricing across the Australian fuel market and iii) Higher convenience earnings, which allows less reliance on fuel discounting. Further, the Fuels marketing margin is likely to remain elevated, given ALD’s continued investment in higher-margin convenience retail, premium fuels, loyalty programs, and digital offers.

Based on recent commentary from ALD and ASX-listed competitor Viva Energy Group (ASX: VEA), ALD appears to have outperformed VEA in the convenience and retail segment. However, the latter has performed better in the wholesale market.

The Company is accelerating the rollout of its U-Go self-service (unmanned) petrol station format. This entails converting and opening dozens of fuel-only sites across Australia as part of a broader shift in retail strategy. The U-Go model removes traditional convenience store operations and staffing, focusing on high-volume fuel sales in streamlined, lower-cost forecourts. Early performance indicators from the U-Go stores rolled out suggest improved fuel volumes and stronger site-level earnings compared to legacy formats.

EG Australia Acquisition Strengthens Ampol’s Retail Fuel Presence

In August 2025, ALD announced that it entered into an agreement to acquire EG Australia, a leading Australian fuel and convenience retailer with 512 sites nationwide, for a headline price of $1.1b. The acquisition strengthens Ampol’s position as one of Australia’s leading transport energy providers and expands the Company’s fuel and convenience offering.

The acquisition is expected to be high-single-digit EPS accretive and double-digit Free Cashflow per share accretive. These expectations are underpinned by the potential for material synergies. In particular, the Company has identified ~$65–80m in predominantly cost-related synergies across improved supply chain and head office consolidation.

Refiner Margins to Remain Elevated

ALD reported a Lytton Refiner Margin (LRM) of US$25.45/bbl for the three months to 31 March 2026 (1Q26). This figure included a substantial uplift in global refiner margins in March following commencement of the Middle East conflict and its subsequent impact on shipping through the Strait of Hormuz.

Recent Company commentary indicated that the LRM is expected to remain strong through 2Q26 noting increases in landed crude costs for Lytton. The Turnaround and Inspection at the Lytton refinery (which typically impacts the LRM) is scheduled for early August 2026.

Crack spreads have increased and remained structurally elevated since late April 2026. This margin expansion is driven by strong market demand for essential refined fuels and severe supply chain disruptions originating from the Middle East conflict. When crack spreads increase, refiners can typically sell their products for relatively more compared with what they paid for crude. In ALD’s case, regional crack spreads (especially for gasoline and diesel) is a key influence for the LRM.

Gearing Expected to Decline to Lower End of Target Range

Gearing (on an adjusted net debt to EBITDA basis) as at 31 December 2025 was 2.3x, having returned to within the Company’s target range of 2.0 – 2.5x.

Stronger refiner margins, as well as lower CAPEX guidance for FY26, should allow ALD to reduce its gearing to ~2.1x by the end of FY26. In turn, this implies that the resumption of special dividends is likely in FY27. This is most likely to start from February 2027 when FY26 results are released. The Company typically consider capital returns where gearing is <2.0x (or where sufficient headroom exists within the target gearing range).

Fundamental View

Following the re-rating, ALD’s 1-year forward P/E multiple has increased from ~10.5x to 13x. The discount to the average multiple of ~14 over the last three years, which supported our POSITIVE view, has narrowed. Hence, value at current levels isn’t as compelling.

Having said that, we note that ALD retains fundamental appeal. In particular, the resumption of special dividends in FY27 enhances yield appeal. In addition, the improvement to ALD’s convenience retail offering via the EG Australia acquisition provides an expanded and more stable earnings base. It also and further diversifies earnings away from refining (which has a volatile long-term earnings profile).

Charting View

ALD has been trading higher for past year and it has been contained in a channel (blue lines). It recently bounced off the lower end of that channel triggering a buy signal on the MACD. However, it is now at the top end of that channel which means that investors can be patient and wait for the next dip in the share price.

 

Michael Gable is managing director of Fairmont Equities.

 

CLICK HERE to read our Testimonials.

Current share prices available here.

You can learn more about technical analysis in this article.

 An 8-week FREE TRIAL to The Dynamic Investor can be found HERE.

Would you like us to call you when we have a recommendation? Check out our services.

Disclaimer: The information in this article is general advice only. Read our full disclaimer HERE.

Like this article? Share it now on Facebook and X!