Caltex Australia Report 2022

HI5002
Finance for Business
A Report on Caltex Australia
Name of the Student

1
Rewriting
2.5 share & Bond Issuance
Caltex is set to be refinancing its debt from time to time. There is no real certainty related
to debt availability. In managing the interest rates risk, which plagues the company, Caltex
entered into a fixed rate debt framework. First, Caltex possesses share retention programs which
are designed to courage all the company's sizeable holdings for a longer period. In 2018 the
shares which were on the issue and fully paid amounted to 524, 944, 000 (Caltex, 2018). The
outstanding shares for this year were similar compared to those of last year. There is evidence
that there was no redemption or in-kind issuance of shares. In 2018 Caltex's net debt surged by
almost $141 million to $955 million, which resulted from the publication of a large amount of
debt instead of gaining leverage (Investing, 2019). The process impacted Caltex financials
because reports were drawn down to increase interest expense. Besides, the issuance of large
debt amount led to increased gearing ratio. In 2018 the gearing ratio was 22% while in 2017 it
was 20.8%. Caltex's business is competitive and sustaining; it requires maintaining sufficient
cash holdings and inventory. Consequently, maintaining the competitive nature of Caltex
requires adequate credit facilities for providing hedges during turmoil cases. The parent company
Caltex enacted a Deed of Cross Guarantee which was entered with the effect that firms shall
need to warrant the outstanding debt (Caltex, 2018). The below figure shows the debt maturity
profile for the entity together with estimated debt payments (Caltex, 2018).
Figure 6: Debt Maturity Profile

2
(Source: Caltex, 2018)
The above figure is a clear indication that Caltex's access to bi-lateral bank facilities shall
be increased in the future. Also, the chart shows that as time goes by, the company shall be
having access to medium-term notes. Caltex is more focused on maintaining and establishing a
capital structure which sustains stability for the company to access debt as well as other equity
markets.
2.6 change in P/E Ratios & Share Price
Changes in P/E are a clear indication of overvaluation or even undervaluation. An entity
is said to be overvalued if its price to earnings ratio is higher compared to a firm in a similar
industry and sector. Hence, such kind of company is overvalued when compared to its
competitors. In comparing the Caltex price to earnings ratio, the following data is obtained. The
industry's price to earnings ratio was 397.95, while the P/E ratio for Caltex was approximately
(Investing, 2019). From the results, there must be undervaluation on the side of Caltex. Hence,
the finding represents undervaluation, meaning that the stock attracts potential investors and
stakeholders. The below figure is signifying the suitable price to earnings ratio in the last three
years.