Investment Column: Save survives forecourt fight

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The Independent Online
SAVE IS the comeback kid of petrol retailing. Against all the odds, the independent forecourt operator has managed to survive the fiercest price war the sector has ever seen.

Yesterday's results showed that Save is once again pumping out growth. With Esso's offensive coming to an end, volumes are rising again. True, the 2.4 per cent advance in profits to pounds 4.1m was below analysts' expectations and knocked the shares down 5p to 95p. Save believes it can catch up in the second half and maintains that the future outlook is rosy, with oil prices set to stabilise and little prospect of another forecourt price war.

However, doubts remain, especially because Save, with its 4 per cent slice of the market, looks too small to compete with the likes of Esso, Mobil and Texaco. The fear is that if one of the giants launches another price-cutting initiative, Save would be plunged into trouble all over again. It could also be hurt by a rise in oil prices because it has no refineries and must pay the market price for crude oil.

These weaknesses make Save an attractive takeover target. A mystery bidder, believed to be a bank, sniffed around in June, only to withdraw three days later. But with consolidation rampant in the industry, oil giants with a need to expand downstream such as Texaco and Shell could be interested in Save. Given the chance of a takeover and the shares' low rating - on nine times expected earnings of around pounds 12m - Save looks like a good speculative buy.