Giant Industries GI
July 25, 2001 - 3:24pm EST by
rr543
2001 2002
Price: 10.10 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 90 P/FCF
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 0 TEV/EBIT

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Description

GI refines and markets petroleum products in the Four Corners area where
New Mexico, Arizona, Colorado and Utah join. Free cash flow after
mandatory CAPEX should be greater than $4.00 per share in 2001
(trailing 12 months EBITDA was $8.00 per share) versus a stock price of
$8.32. Q1 showed very strong operating trends. For the three months
ended March 31, 2001, operating income was $7,027,000, an increase of
$4,047,000 from $2,980,000 for the three months ended March 31, 2000.
The increase was primarily due to a 30% increase in refinery margins,
due in part to a reduction in crude oil costs resulting from contract
negotiations with suppliers; an 11% increase in retail merchandise sales
with nominally higher margins quarter-to-quarter; an 11% increase in
retail fuel margins; and a 3% increase in wholesale fuel volumes sold by
Phoenix Fuel to third party customers.

This is a substantial enterprise, with sales in excess of $1 billion,
and an NYSE listing. Its three strategic units are oil refining, retail
gas stations and wholesale distribution of industrial/commercial fuels
and lubricants. The two refineries are efficient operations, (90% of
output is high value products) with margins of $7.63/bbl in 2000.Operating
at 80% of capacity, there is obvious potential for expanded output without
major CAPEX.

The retail group consists of 179 service stations/convenience stores. The
group appears well run, with 17% year-over-year growth in merchandise sales
in 2000 (9% increase in same store sales). Under performers are being
weeded out.

The distribution group, Phoenix Fuel, is an independent distributor of
gasoline (425 million gallons), plus a full line of lubricants, throughout
Arizona and in Las Vegas.

Key Financial Data: 3/31/2001 and 12 months trailing

Long-term Debt $257
Equity 129
Operating Income 38
Depreciation 34
EBITDA 72
Interest Expense 24

CAPEX
Mandatory 17*
Total 24*
*2001 E

Catalyst

Stock buyback - a major repurchase program has reduced outstanding from
13 million to 9 million over the past two years. Management owns 22%,
and Jim Acridge, 61, CEO, appears amenable to a takeover. Holly Corp.
had in fact announced an acquisition of GI, but the transaction was
killed by the FTC.
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