CLMT is too cheap at the current price. Period.
News from CLMT has been improving month by month. Certainly, the business of CLMT, in the oil industry, is subject to the uncertainty of the oil market. Even with some quarterly uncertainty, Calumet’s turn around since this management team came on board (March 2016) has been remarkable.
The current pull back under $4.00 is a buying opportunity in our opinion. Our three-year target goal remains at $16.00 (Sixteen Dollars).
Our 4X target goal is based on an incentive goal of a management team bonus, when 1) they get the share price to $16.00 and 2) reinstate the dividend. Our estimate is that the dividend, when reinstated will be between $1.00 and $2.00 per share annually. Manage has assets that can be sold now, but, is waiting for the best timing to sell said assets. In the meantime, they are refinancing debt and paying down debt from cash flow. We believe that when one or two of the five current refineries are sold, a dividend will be announced, and the share price will respond with a very quick rally of a minimum of 2X the current price and more likely 3X the current price. It is entirely possible that given additional time, the share price can exceed the 4X goal we are presenting.
Technically Calumet is negative. The price is trading below its 50-day and 150-day moving averages. It is at and could break below the 200-day moving average as robo trading kicks in. We believe the time below the 200-day moving average will be very short as humans recognize the value and opportunity in these shares. Robots tend to act on cause and effect situations but are not very good at recognizing value and opportunity.
Fundamentally, CLMT is generating between $150 million and $225 million a year in positive cash flow. This will be lumpy as prices change in the oil industry and maintenance is required at the refineries, but the positive cash flow trend has been expanding as the time in place for this management team expands.
I feel very positive about the opportunity in these shares.
Recent News:
I: S&P GR Revises Calumet Specialty Prods Partners Outlook to Positive
Dow Jones 9/23/19 1:12 PM ET
Sourced from eTrade
II: Sep 20, 2019
III: Sep 6, 2019
IV: Aug 8, 2019
Calumet Specialty Products Partners, L.P. Reports Second Quarter 2019 Results
Company uses improved liquidity position to repurchase (retire) additional $67 million of unsecured notes in the second quarter.
The Partnership’s $16.8 million of Net loss and $0.21 Net loss per unit for the second quarter 2019 included a $2.6 million favorable net impact related to the non-cash lower of cost or market (“LCM”) inventory adjustments, a $16.2 million non-cash loss on impairment and disposal of assets and a $12.2 million unrealized hedging loss. Excluding these and other non-cash charges, Adjusted net income and Adjusted net income per unit were $16.6 million and $0.21, respectively. The Partnership’s $79.6 million of Adjusted EBITDA for the second quarter 2019 included a $2.6 million favorable net impact related to the non-cash LCM inventory adjustments. Excluding this impact, Adjusted EBITDA (excluding-LCM/LIFO) was $77.0 million.
Dated: Sept, 26, 2019 Thomas Linzmeier editor tom @Livingoffthemarket.com
* An account related to LOTM holds a position in this security. Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
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