Caltex refines, imports and markets fuels and lubricants, supplying 1/3 of Australia's transport fuel needs. It is also increasingly moving into convenience, with a network of 1,900 owned or affiliated sites around Australia which are fast expanding their service offering.

It is a business in transition.

For starters, it is moving further away from refining and is instead directly importing fuels from Asia.

(Syndey's Kurnell site now just an import terminal, with Brisbane's Lytton the only refinery in operation. Lytton supplies around 35% of fuel products, and 80% of lubricants. In 2017, 30% of EBIT was from refining.)

It is also converting its franchised convenience sites to a company owned model, and expects the remaining 433 franchise sites to be converted to corporate ownership by mid-2020. This is partly in response to findings that some franchisees were underpaying staff. The move will almost certainly impact margins.

Reflecting this change, (and potentially preparing for a demerger of the two distinct buisnesses), Caltex is moving to a new reporting structure. The two segments are: 

Convenience retial --> Petrol & Convenience from its network of petrol stations (1/3 of EBIT)

Fuels & Infrastructure --> Supply, B2B, refining and infrastructure (2/3 of EBIT)

The negatives: a capital intensive business that faces huge volatility with crude prices and FX rates. A highly competitive market which is seeing declining fuel usage (due to increased engine efficiency and a likely shift to battery tech). Caltex is also set to lose a large wholesale supply contract for Woolworths, which could leave a $150m earnings hole.

The positives: A wondeful store network. Potential to spin-off sites into a REIT (something that could release $2.5b, clear the debt and issue a fat special dividend and release a bunch of franking credits). A heightened focus on convenience which delievers 'smoother' earnings. Could also further expand offshore (already now in NZ and Phillipines) 

At around 12x earnings (at time of writing), the price seems undemanding, but hard to see any material growth (excluding lucky wins with favourable FX and input costs). Certainly some potential with bolstered convenience operations and asset recycling -- but lots of execution risk there..