Petroleum

The Company

Vivo Energy CI is a joint venture between Vitol (40%), Helios Investment Partners (40%) and Shell (20%). The group obtained the licence to distribute and market Shell-branded fuels and lubricants in 16 African countries on December 1, 2011. In Côte d’Ivoire, Vivo Energy CI is the second-largest oil marketing company after Total CI. Vivo Energy CI’s retail network includes 170 service stations, nearly half of which are located in Abidjan, with the remaining sites spread across the country, giving the company nationwide coverage.

The company has recorded significant expansion in recent years, as shown in its annual results. In fact, in 2015, driven by an increase (+16%) in volume sold, the company’s turnover increased by 6.56% to reach CFA276.37bn (€414.6m). Following the same trend, net income grew by 10.24% to CFA3.27bn (€4.9m). These good results reflect an overall enhancement in the level of margin.

During the first half of 2016 turnover shrunk (-5.42%) to CFA130.18bn (€195.3m) due to the decline in the pump price. This drop in pump price offset the growth (+9.45%) in volume sold. However, in the first half of 2016 net income increased by 10.38% to CFA2.31bn (€3.5m). This increase is the result of an improvement in gross profit. In fact, since company margins are fixed, volume growth is the main driver of gross profit.

Outlook

For the coming years, Vivo Energy CI’s strategy laid out the prospects for a solid long-term outlook. In fact, propelled by a peak in the number of vehicles sold in the country, the retail segment’s sales should rise. Also, the company should start to reap benefits from its large-scale acquisitions programme made between 2012 and 2013. In fact, 22 sites from independent oil distributor Lubafrique and 10 sites from Royal Oil were bought during this period. We believe that those service stations will operate more efficiently going forward, offering additional revenue for the operator. Lastly, the growth momentum of consumption in the commercial segment should be sustained over the next few years, driven by robust economic growth in Côte d’Ivoire. According to the IMF, real GDP in the country is projected to grow by 8% in 2016 and 2017. However, despite good operational prospects, Vivo Energy CI’ s stock is currently overvalued. The favourable business environment and the positive expectations have led the investors to pay a high premium for the stock. It is currently trading with a price-to-earnings (P/E) ratio of 57.4 and an enterprise value (EV)/earnings before interest, tax, depreciation and amortisation (EBITDA) of 25.1, which is far above the sector averages for P/E (10.6) and EV/EBITDA (8.3).

At the board’s proposal, the general meeting approved the split of Vivo Energy CI share in a ratio of 1 to 50. This share split has put further upward pressure on the stock price.

Development Strategy

Over the 2012-17 period, Vivo Energy CI is committed to doubling the size of its business. To achieve this, the company has engaged in an ambitious investment programme, which includes an external growth strategy through the acquisition of small players in difficulty. As a consequence, the number of gas stations in its possession increased from 153 in 2013 to 170 in 2015. Also, as part of this strategy, the recently-bought gas stations have been modernised and brought into line with the group’s standards, while the older stations have been rebranded.

Additionally, after several years of absence, the group has revived its liquefied petroleum gas segment and aims to capture growth from this activity going forward. From 2016 onwards, Vivo Energy CI wants to slow down its capital expenditure and capitalise on its previous investments. Simultaneously, the company is undertaking a cost-control programme to improve its EBITDA margin.