Delek US Holdings Inc. (DK) AT 17.04
Fundamental: 7
Chart: 6
Nov 30, 2006
Delek US Holdings, Inc., through its subsidiaries, operates
in the energy industry. It engages in refining, supplying,
and retail marketing of petroleum products in the United States.
The company operates through two segments: Refining and Retail.
The Refining segment operates an independent refinery with
a design crude distillation capacity of 60,000 barrels per
day in Tyler, Texas. The refinery supplies a range of refined
petroleum products through its truck loading facilities and
third-party pipelines directly to oil companies, independent
refiners, and marketers, as well as to distributors, utility
and transportation companies, and independent retail fuel
operators. The Retail segment markets gasoline, diesel, and
other refined petroleum products, as well as food, beverages,
and convenience merchandise, such as tobacco products, dairy
products, and groceries through company-operated retail fuel
and convenience stores primarily under ‘MAPCO Express’,
‘East Coast’, and ‘Discount Food Mart’
brand names.
DK's business model is very similar to ALJ and DK is a bargain
at current price.
Here is the Q3 2006 earning summary:
- Net income of $26.3 million, or $0.52 per basic share
and $0.51 per diluted share, for the third quarter 2006
compared to $32.5 million, or $0.82 per basic and diluted
share, for the third quarter 2005.
- For the first nine months of 2006, Delek reported a record
net income of $81.4 million, or $1.78 per basic share and
$1.75 per diluted share compared to $39.5 million or $1.00
per basic and diluted share for the first nine months of
2005.
- Consolidated: Net sales for the third quarter of 2006
were $920.9 million versus $698.7 million in the comparative
2005 third quarter, an increase of $222.2 million. The increase
was primarily driven by sales from the new marketing segment,
the additional retail stores which have been acquired from
BP and Fast Petroleum in the previous twelve months, and
improved sales at the Tyler refinery.
- The net sales for first nine months of 2006 were $2.4
billion vs 1.387 billion for the first nine months of 2005.
The Q3 earning was lowered after a spot inventory purchase
loss, an unrealized loss on interest rate derivatives and
write-off costs. With the current rate, the EPS for 2006 should
be a minimal of $2.38 assuming a EPS of $.50 for Q4. The P/E
will be 7.16 and it looks very much undervalued. I do not
see oil will be much lower in 2007 than now, and the earning
for 2007 should be higher as well. Using a P/E of 9, this
gives DK $21.42.
Below is the chart on DK. $16 is a good support for it so
far. It recently completed a double bottom at around $16,
and it's coming off the low. The short term target is $19
while the 6 months target is $21.50. As long as DK shows growing
revenue and growing net profit, it should follow the path
of ALJ going to about $30 in a year or so. Use a stop loss
of $15.50
