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Caltex to float stake in 250 retail sites

Alex Druce
Caltex Australia will undertake an IPO of up to a 49% interest in 250 retail freehold sites

Caltex Australia shares have jumped on plans by the fuels operator to launch a property IPO and float a 49 per cent stake in 250 retail sites.

Caltex said it would retain a 51 per cent majority interest in the freehold sites and enter into long-term lease agreements, placing the sites into a property trust that would receive approximately $80 million to $100 million in rental payments from Caltex in the first year.

The plan was released on Monday in tandem with a weak full-year forecast, with Caltex expecting earnings before interest and tax to hit between $190 million and $210 million, a fall of up to 38 per cent on last year's $307 million.

The company said, however, the outlook reflected a better second-half performance.

"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," chief executive Julian Segal said in a statement.

Nonetheless, shares in the company climbed 10.2 per cent to a fresh 13-month high of $30.69 in the first 10 minutes of trade on Monday, and were still 6.75 per cent higher at $29.73 by 1321 AEDT.

If implemented, Caltex said the proposed IPO is expected to realise significant value to shareholders, while allowing it to maintain operational control of the company's core convenience retail network.

The 250 sites that would be part of the proposed property IPO represent all the freehold sites within the company's identified core network of 500 sites.

If approved, Caltex said the transaction is expected to complete in the first half of 2020.

Moody's Investment Services said while the proposed IPO was credit positive in the short term, it had concerns Caltex would lose financial flexibility in the long run.

"We view the proposed transaction as credit negative in the longer term, Moody's vice president Ian Chitterer said in a note.

"Nevertheless, the property IPO has no impact on its rating, given the company's strong financial profile and track record of maintaining conservative credit metrics."