Credit Suisse Downgrades Delek US (DK) to Neutral
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Analyst Edward Westlake commented, "DK management have been assertive in their defense of the SOTP value proposition. In their presentations they have been highlighting that retail and the equity share of their MLP subsidiary, DKL, meant refining was free. Management have also acted, recently selling their retail for $535m, significantly above our carrying value. DK sits on a healthy cash balance of $377m in 2Q, which will increase with the retail sale. However, refining has been tough in 2016, partly due to margins, partly RINS and partly narrow crude spreads. Having spent a decent sum on its refining in recent years, and with no upcoming turnarounds, DK is well placed to survive some tougher times. However, to deliver equity upside in our framework, DK likely needs to close the ALJ transaction to capture further synergy benefits."
Shares of Delek US closed at $17.84 yesterday.
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