Disclaimer: This is not investment advice. The author holds a position in Delek US Holdings shares at the time of writing. Invesment in these shares is risky and may result in the loss of capital. Author can buy, sell or hold any share at any time. His views may be biased and the information in this post incorrect and his historic performance is oil-related stocks is mediocre at best. Please do your own research!
One issue I have with DK is that they never explain what the obstacle to unlocking value is. They are quite vague. We would need an activist investor to enter and stir things, don't you think so?
Shell and numerous other oil companies that had captive MLPs just bought them in over the last couple years. Why not just buy the remaining shares as the combined business would have a lower cost of capital and there no longer seems to be much demand for MLPs
Summing up refinery EBITDA together with Corp&Other and only then 'slapping' a low capitalisation multiple on it might be appropriate for the refinery part (low quality, peak margins, high Capex thus low FCF conversion, what not). But isn't it highly forgiving for the corp and other part if the holding (sotp ) is not resolved soon?
Otherwise 4x for refinery and say 10x for corp and other might be more appropriate? (Don't pick on exact numbers here)
thanks, been watching for the last 2 years and glad to see a recent update.
you mention incentives are aligned, but can you help clarify? i see a generic compensation CEO package.
speaking of which, i see a generic CEO when what could really add value is someone with enough personal technical background to keep refinery maintenance below peer average. and when i see someone again coming from the delek tree, i wonder why is there STILL so much foreign influence\control of a company with 3 (i.e., arguably all) subscale segments on the otherside of the world?
despite the shrinking financial stake directly by delek israel, i see legacy delek BOD members and the most concentrated owner is a another israeli group, ion asset. even if my paranoia is not helping here, i would pass unless something really obvious has been missed.
“Spin of some or all of the DKL units to shareholders this might be relatively easy”.
I’m pretty sure many DK owners would not want shares in a MLP for tax reasons.
IMHO, a sell of DK to a third party that wants to own a captive MLP is probably the easiest way to close the gap. The biggest problem is that all the DK and DKL pieces are sub scale, but I don’t want Dk to grow the pieces bigger, I want someone else to grow bigger by buying them.
One issue I have with DK is that they never explain what the obstacle to unlocking value is. They are quite vague. We would need an activist investor to enter and stir things, don't you think so?
Shell and numerous other oil companies that had captive MLPs just bought them in over the last couple years. Why not just buy the remaining shares as the combined business would have a lower cost of capital and there no longer seems to be much demand for MLPs
Summing up refinery EBITDA together with Corp&Other and only then 'slapping' a low capitalisation multiple on it might be appropriate for the refinery part (low quality, peak margins, high Capex thus low FCF conversion, what not). But isn't it highly forgiving for the corp and other part if the holding (sotp ) is not resolved soon?
Otherwise 4x for refinery and say 10x for corp and other might be more appropriate? (Don't pick on exact numbers here)
thanks, been watching for the last 2 years and glad to see a recent update.
you mention incentives are aligned, but can you help clarify? i see a generic compensation CEO package.
speaking of which, i see a generic CEO when what could really add value is someone with enough personal technical background to keep refinery maintenance below peer average. and when i see someone again coming from the delek tree, i wonder why is there STILL so much foreign influence\control of a company with 3 (i.e., arguably all) subscale segments on the otherside of the world?
despite the shrinking financial stake directly by delek israel, i see legacy delek BOD members and the most concentrated owner is a another israeli group, ion asset. even if my paranoia is not helping here, i would pass unless something really obvious has been missed.
“Spin of some or all of the DKL units to shareholders this might be relatively easy”.
I’m pretty sure many DK owners would not want shares in a MLP for tax reasons.
IMHO, a sell of DK to a third party that wants to own a captive MLP is probably the easiest way to close the gap. The biggest problem is that all the DK and DKL pieces are sub scale, but I don’t want Dk to grow the pieces bigger, I want someone else to grow bigger by buying them.