John Leonard, CFA
Special situations, micro-cap, contrarian, CFA

The Bullish Case For SunCoke Energy

SunCoke Energy (NYSE:SXC) trades at a significant discount to its peers despite much lower debt, a superior business model and strong growth prospects.

Company overview

SXC supplies coke (main input in the blast furnace steelmaking process) to steelmakers, which eliminates the need for captive and capital-intensive coke production facilities. SXC is the largest independent producer in the Americas and supplies ~20% of U.S. and Canadian coke demand.

In 2012, SXC sold ~4.4 million tons of coke (and exceeded 100% capacity utilization) to three customers in the U.S. (ArcelorMittal, AK Steel and U.S. Steel) and ~1.3 million tons of metallurgical coal and 0.2 million tons of thermal coal.

Sunoco (NYSE:SUN) spun-off 19.1% of SXC in July 2011...

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