Delek US is actually the U.S. arm of an Israeli conglomerate operating in three segments: refining, marketing and retail. The refining business runs at a distillation rate of 60,000 barrels per day. Delek's marketing segment sells refined products on a wholesale basis in west Texas. Its retail segment sells gas as well as operates convenience stores through a network of over 400 company-operated retail fuel and convenience stores.
Citigroup upgraded Delek US earlier this week, pushing the shares up about 10%. Looking under the hood of the upgrade, the Citigroup analyst cited in a note early this week a recently disclosed acquisition of a 34.6% equity stake in Lion Oil toward the end of the third quarter. As the public learns more about Delek's plans, we may see this position serve as a catalyst for the shares in the next couple of quarters.
Delek's also on the prowl for more acquisitions for its retail segment. Since last year, Delek has grown its asset base 44% via smart acquisitions. Look for more of the same in 2008.
Citi placed a $25 target on this small gas concern with a market cap of just over $1 billion. That leaves room for a 25% appreciation. With smart retail acquisitions and a refinery business that seems to be chugging along nicely, this is an interesting small cap.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
