Ampol (ASX:ALD) acquisition target EG Australia's profitability has held up since the deal's signing, with strong fuel and shop margin growth offsetting declines in fuel volume and tobacco sales, Jefferies said in a May 28 note.
The investment firm sees "significant upside" from the proposed deal due to considerable synergies between the two businesses as well as Ampol's strong credentials in convenience execution, among other factors.
EG Australia's first-quarter results showed a roughly 40% year-over-year increase in earnings, while fuel volume declined around 14% annually in the quarter, compared with a retail fuel volume increase of 1.3% for the overall market.
The fuel and convenience store operator "may be prioritizing margin at the expense of volume to maximize cash flow ahead of sale," Jefferies said.
The equity research firm has a buy rating on Ampol with a price target of AU$37.50.
Shares of Ampol fell 1% in recent Friday trade.