Coronavirus Spills Over Into Weaker Refiner Margins Near Term, but Our Caltex FVE Is Unchanged

We make no change to our AUD 34.00 fair value for no-moat Caltex. That’s despite the company reporting a 28% reduction in its February 2020 refiner margin versus January’s USD 5.78. The Singapore weighted average margin was lower chiefly on the back of soft global demand for gasoline and distillates due to coronavirus. However, the transition to new IMO 2020 fuel specifications further impacted refiner margins. Caltex says demand reductions due to coronavirus are further compounded by the current commitments made by OPEC and other oil producers to maintain current production levels.