+ Watch PBF
on My Watchlist
Seth Klarman, and I like 3/4 oz. bags of potato chips.
Stockpickr insider buying.
PBF has a great dividend yield of 5.2% at 22, with current and estimated coverage to maintain. It looks like it has been on a slide, restructuring and making new acquisitions with a lot of external interests owning it. You could see this as a fixer-upper in progress that yields 5% while it gets its traditional growth back in gear, or a company being sucked dry by institutional investors. Based on the rate of continued investment and the continuity of dividend payouts, I take it as the former. This is a brilliant bet on energy with very little downside left.
a little too risky for real money, but has significant upside, old refineries and limited resources are the main detractors but they are taking steps to improve profitability.
PBF was formed in 2008 and went IPO in late 2012. It has a mission to purchase low-margin refineries, and now has 3. One, in Delaware City, was discontinued by the seller and brought back online by PBF. Long story short, from an original purchase of 3 refineries for $1 billion, PBF had $20 billion in revenues in FY2012 and $0.8 billion in profit in FY2012. The last quarter's results were poor due to a fire at one of the refineries and other less significant factors.In any case, the company has a forward P/E of <6, and is vulnerable to collapse in WTI-Brent spread. Most commodities analysts believe that this spread will remain at or around current value for the next year, which is why I think a year or so is a good time frame to compare with S&P performance. Feedstock pricing volatility affects refiner margins too much to have a longer-term outlook, and PBF does little significant hedging.PBF has a few unique advantages. It can sell asphalt at a premium, as its refineries are the only two East Coast refineries with cokers. It has a newly built, privately owned rail facility in Delaware City that takes costs down $4/barrel. It is a pure refinery play, for those who want to invest in refineries only, without exploration or retail components. Perhaps its biggest advantage is that it is still not widely known.This company, like many refiners, is undervalued by the standard metrics. Due to its focus on the less profitable East Coast and its recency, it is trading at a discount in an already heavily discounted industry. Leverage is present, but reasonable, and the company has great cash flows. PT = 60 in the next 1-2 years, barring plummet in oil prices.
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