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Skip Olinger  

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  • Can Alon USA Energy Maintain Its Torrid Pace? [View article]
    Hi Gary,
    Wow, never heard of these guys; interesting business. I have not done any research myself yet so forgive my basic questions. So I am clear, this company operates a couple of refineries in TX, has some pipelines, has several asphalt terminals all over the west, sells gasoline retail and owns a lot of 7-11's? Does management or a family control the company? This would seem ripe for a split up/spin off. Why hasn't that been done. I don't see a lot of synergies between the businesses; am I missing something?

    Why did the stock run up from $8 to $21? What was the thesis at $8? Why has it dropped 20% to $16.73? Was that the result of the refinery problem? Sounds like that is a temporary problem, which would be good. Could the fall in the crack spread account for the 20% decline in price. How far out are they hedged? I noticed that their earnings exploded at 3/31/13 vs a year ago; what happened?

    Looks like the company is selling at 2.2x EBITDA based on annualizing their 3/31 Q, but that had above average earnings. Also looks like they throw off a lot of FCF and don't have a lot of cap ex.

    What is the investment thesis? Is the company just very cheap? Are earnings and FCF growing very fast for some reason the market is not recognizing? What does the market see here that caused the stock to decline 20% and why is it wrong? I am having a hard time seeing what is really compelling about the company. But is sure looks cheap and generates good cash flow. However, it is a commodity business and the refinery business is very volatile.

    Sorry for so many questions. Just trying to understand what moves the business and why it is a buy.

    best regards,
    Skip Olinger
    Jun 17, 2013. 05:28 PM | 1 Like Like |Link to Comment
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