Delek US Holdings (DK), mcap=$1460m

DK pitch:
– Sum-of-the-parts story with near term catalyst to unlock substantial value.
– A refiner with 4 refineries in the Gulf Cost area and 79% ownership of $DLK midstream assets.
– The company is undervalued, gushing cash flow, and returning capital to shareholders through aggressive buybacks.
– New CEO is publicly stressing undervaluation and committing to unlocking sum of parts value of the assets.
– 79% ownership of DKL already accounts for almost the whole of DK’s market cap.
– Earnings are expected to remain elevated for the near to medium term, resulting in a huge cash inflow.

DK valuation:
– Valuing refining segment at 4x normalized EBITDA, adding $24/share for $DLK stake and $7.4/share for retail segment, results in SOTP of $52/share after corporate expenses and net debt.

Exp. gain: 100% to $52/share.

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1 Comment

1 thought on “Delek US Holdings (DK), mcap=$1460m”

  1. thoughts on if theres a chance of getting screwed if you sell DKL in the SOTP play? ie: DK buys DKL at a 20% premium to current market (so the see through discount goes away and the hedge loses)

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