If you are looking for ASX 200 shares with deep value, then look no further than Viva Energy Group Ltd (ASX: VEA).
That's the view of analysts at Goldman Sachs, which believe that huge returns could be on offer from the fuel retailer's shares over the next 12 months.
What is the broker saying about this ASX 200 share?
Goldman notes that the ASX 200 share has released a quarterly update and it was pleased with what it saw. It said:
VEA have reiterated 2025 guidance presented at the February result noting they are on track to deliver A$270-330 mn EBITDA across Convenience and Commercial businesses over 1H25 (GSe A$303 mn), and are delivering on initiatives to reduce costs and grow earnings by A$105 mn in 2H25 (implying A$375-435 mn, GSe A$400 mn).
After some uncertainty at the 2024 result regarding the sustainability of 2H25 cost reductions into annualised earnings uplift next year, VEA confirmed that the previously announced initiatives could contribute ~A$160 mn EBITDA in 2026 as some cost savings are offset by investment in growth. The initiatives imply A$700-820 mn EBITDA in 2026 excluding other earnings improvement from OTR conversions offsetting tobacco sales decline, where we estimate A$778 mn.
In light of this, the broker has boosted its near term earnings estimates.
Big return potential
According to the note, Goldman Sachs feels that the market is incorrectly discounting Viva Energy's shares, creating a compelling buying opportunity for investors.
In response to its quarterly update, the broker has retained its buy rating and $3.00 price target on the ASX 200 share. Based on its current share price of $1.53, this implies potential upside of almost 100% for investors over the next 12 months.
In addition, the broker is forecasting some attractive dividend yields in the near term. It expects a yield of 4.5% in FY 2025, 5.5% in FY 2026, and then 7.3% in FY 2027. This stretches the total potential 12-month return beyond 100%.
Commenting on its buy rating, the broker concludes:
We revise our 2025/26/27 EBITDA +1%/0%/+4% adjusting for higher refining earnings this quarter and deferring an assumed 2027 refinery turnaround to 2028. We are Buy rated on VEA considering the significant 50% discount to our SOTP valuation which we believe is over-indexing softer refining earnings during a turnaround year, despite a defensive Federal Government subsidy paid for margins below ~A$10/bbl.
