Ideas to think over for this Sunday 15-Jul-2012
Phillip 66 (PSX) : The firm is a recent spinoff from COP. Trades at 5x earnings and basically has 3 business, Chemicals, oil refining and midstream. The firm seem to have good prospects. Recently talked about by two smart investors -
What might be the catalysts: SOTP by industry experts suggest a 30% upside.
Chemical: The firm has a JV with chevron. PSX apparently also has a proprietary process producing higher quality ethylene and polyethylene from ethane and naphtha at lower cost. In addition PSX licenses technology to competitors. 80% capaicty is within US where it uses low price ethane and sell into high price markets, earning good spread. Valued at approx. $13 a share at 10x P/E
Midstream assets at 17x FCF are worth aporox. $20 a share. Two non-refining segments are worth $31 a share
Refining has 3 segments - specialty marketing, pipeline. With no capacity to move crude out of kushing and crude trading at a discount to brent, for few yrs refinary's will enjoy low cost advantage. Some estimates suggest that refining alone worth is worth approx. $10 a share with pipeline assets within refining in addition to marketing business can be possibly valued at $20. The basic refining is worth approxc $10 a share. Refining is basically free and can earn potential EPS of approx. $4.00 share.
Taking $9 per share debt out of the price, the stock is still worth approx $50 s share.