Sunoco Logistics Partners L.P. (SXL) seems undervalued when adding all of its component parts, including assets unrecognized by the market such as refinery plants, cash and a spun-out component part, qualifying it as a special-situation investment in the eyes of Jonathan S. Vyorst, Senior Vice President of Paradigm Capital Management, Inc.
“We had bought Sunoco back in January 2012, and at that time, people were selling off shares because the company had a refinery on the East Coast that was losing money. Sunoco had a plan to close down the refinery, and thereby stem its losses,” Vyorst said. “It also had other assets that made it much more valuable than the market recognized.”
Vyorst added up all of SXL‘s characteristics: the 5,000 Northeast gas stations, a publicly traded master limited partnership, the spinoff of its metallurgical coking business, its IPO execution and SXL‘s net cash of $700 million, and decided Sunoco was worth at least $50 a share while selling at $35.
“All one had to do to recognize its value was to take out a calculator and add up the different pieces,” Vyorst said. “When Sunoco spun off SunCoke Energy, its share price increased by 10% or 15%. Then it put in place a plan to repurchase about 20% of its shares with the excess cash it had on its balance sheet. That increased the value as well. Then in April, Energy Transfer Partners offered to buy Sunoco for $50 a share.”
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