Intrinsic value of Delek Logistics Partners - DKL

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$31.30

  Intrinsic Value

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  Value-price divergence*

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$31.30

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of DKL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -24.07
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  448
  602
  616
  631
  649
  669
  691
  714
  739
  767
  796
  828
  861
  897
  935
  976
  1,018
  1,064
  1,111
  1,162
  1,215
  1,272
  1,331
  1,394
  1,460
  1,529
  1,602
  1,679
  1,760
  1,846
  1,935
Variable operating expenses, $m
 
  546
  558
  573
  589
  607
  626
  647
  670
  695
  722
  749
  780
  812
  846
  883
  922
  962
  1,006
  1,052
  1,100
  1,151
  1,205
  1,261
  1,321
  1,384
  1,450
  1,520
  1,593
  1,670
  1,751
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  370
  546
  558
  573
  589
  607
  626
  647
  670
  695
  722
  749
  780
  812
  846
  883
  922
  962
  1,006
  1,052
  1,100
  1,151
  1,205
  1,261
  1,321
  1,384
  1,450
  1,520
  1,593
  1,670
  1,751
Operating income, $m
  78
  56
  57
  59
  60
  62
  64
  67
  69
  72
  74
  79
  82
  85
  89
  93
  97
  101
  106
  110
  116
  121
  127
  132
  139
  145
  152
  160
  167
  175
  184
EBITDA, $m
  99
  77
  79
  81
  83
  85
  88
  91
  94
  98
  102
  106
  110
  114
  119
  124
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  247
Interest expense (income), $m
  12
  0
  -1
  -1
  -1
  -1
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
Earnings before tax, $m
  63
  56
  59
  60
  61
  63
  65
  66
  68
  70
  73
  76
  79
  82
  84
  87
  91
  94
  98
  102
  106
  110
  115
  119
  124
  130
  135
  141
  147
  154
  160
Tax expense, $m
  0
  15
  16
  16
  17
  17
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  25
  26
  27
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
Net income, $m
  63
  41
  43
  44
  45
  46
  47
  48
  50
  51
  53
  56
  58
  60
  62
  64
  66
  69
  71
  74
  77
  80
  84
  87
  91
  95
  99
  103
  107
  112
  117

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  416
  383
  391
  401
  413
  425
  439
  454
  470
  488
  506
  526
  548
  570
  595
  620
  647
  676
  707
  739
  773
  808
  846
  886
  928
  972
  1,019
  1,068
  1,119
  1,173
  1,230
Adjusted assets (=assets-cash), $m
  416
  383
  391
  401
  413
  425
  439
  454
  470
  488
  506
  526
  548
  570
  595
  620
  647
  676
  707
  739
  773
  808
  846
  886
  928
  972
  1,019
  1,068
  1,119
  1,173
  1,230
Revenue / Adjusted assets
  1.077
  1.572
  1.575
  1.574
  1.571
  1.574
  1.574
  1.573
  1.572
  1.572
  1.573
  1.574
  1.571
  1.574
  1.571
  1.574
  1.573
  1.574
  1.571
  1.572
  1.572
  1.574
  1.573
  1.573
  1.573
  1.573
  1.572
  1.572
  1.573
  1.574
  1.573
Average production assets, $m
  267
  276
  282
  289
  297
  306
  316
  327
  339
  351
  365
  379
  395
  411
  428
  447
  466
  487
  509
  532
  557
  582
  610
  638
  669
  700
  734
  769
  806
  845
  886
Working capital, $m
  11
  26
  27
  28
  29
  29
  30
  31
  33
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  59
  61
  64
  67
  71
  74
  77
  81
  85
Total debt, $m
  0
  -42
  -34
  -25
  -15
  -3
  9
  23
  37
  53
  70
  88
  107
  127
  149
  172
  197
  223
  250
  279
  309
  342
  376
  411
  449
  489
  531
  575
  621
  670
  721
Total liabilities, $m
  429
  344
  352
  361
  371
  383
  395
  409
  423
  439
  456
  474
  493
  513
  535
  558
  583
  609
  636
  665
  695
  728
  762
  797
  835
  875
  917
  961
  1,007
  1,056
  1,107
Total equity, $m
  -13
  38
  39
  40
  41
  43
  44
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
Total liabilities and equity, $m
  416
  382
  391
  401
  412
  426
  439
  454
  470
  488
  507
  527
  548
  570
  594
  620
  648
  677
  707
  739
  772
  809
  847
  886
  928
  972
  1,019
  1,068
  1,119
  1,173
  1,230
Debt-to-equity ratio
  0.000
  -1.090
  -0.860
  -0.620
  -0.350
  -0.080
  0.210
  0.500
  0.790
  1.080
  1.380
  1.670
  1.950
  2.230
  2.510
  2.780
  3.040
  3.290
  3.540
  3.770
  4.000
  4.230
  4.440
  4.640
  4.840
  5.030
  5.210
  5.380
  5.550
  5.710
  5.860
Adjusted equity ratio
  -0.031
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  63
  41
  43
  44
  45
  46
  47
  48
  50
  51
  53
  56
  58
  60
  62
  64
  66
  69
  71
  74
  77
  80
  84
  87
  91
  95
  99
  103
  107
  112
  117
Depreciation, amort., depletion, $m
  21
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
Funds from operations, $m
  116
  62
  64
  66
  67
  69
  71
  73
  75
  77
  80
  83
  86
  89
  92
  96
  99
  103
  108
  112
  117
  122
  127
  132
  138
  144
  151
  157
  165
  172
  180
Change in working capital, $m
  15
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
Cash from operations, $m
  101
  60
  63
  65
  66
  68
  70
  72
  74
  76
  79
  81
  84
  87
  90
  94
  97
  101
  105
  110
  114
  119
  124
  130
  135
  141
  148
  154
  161
  168
  176
Maintenance CAPEX, $m
  0
  -19
  -20
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
New CAPEX, $m
  -11
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
Cash from investing activities, $m
  -73
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -84
  -87
  -92
  -96
  -101
Free cash flow, $m
  28
  35
  38
  38
  38
  38
  38
  39
  39
  40
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  52
  54
  56
  58
  60
  62
  64
  67
  69
  72
  75
Issuance/(repayment) of debt, $m
  315
  -42
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Issuance/(repurchase) of shares, $m
  0
  56
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -4
  14
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Total cash flow (excl. dividends), $m
  24
  -6
  46
  47
  48
  49
  51
  52
  54
  55
  57
  59
  61
  63
  66
  68
  71
  73
  76
  79
  83
  86
  90
  94
  98
  102
  106
  111
  116
  121
  126
Retained Cash Flow (-), $m
  2
  -49
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  45
  46
  47
  48
  49
  51
  52
  54
  55
  57
  59
  61
  63
  65
  68
  71
  73
  76
  79
  83
  86
  90
  93
  97
  102
  106
  111
  116
  121
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  0
  41
  40
  38
  37
  36
  34
  33
  31
  29
  27
  25
  23
  21
  19
  17
  15
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
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Delek Logistics Partners, LP owns and operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. It operates in two segments, Pipelines and Transportation, and Wholesale Marketing and Terminalling. The Pipelines and Transportation segment consists of assets, including pipelines and trucks, and ancillary assets that provide crude oil gathering and crude oil, intermediate and finished products transportation, and storage services primarily in support of the Tyler and El Dorado refineries, as well as offers crude oil and other products transportation services to third parties. This segment operates approximately 400 miles of crude oil transportation pipelines; 366 miles of refined product pipelines; and approximately 600 miles of crude oil gathering and trunk lines with an aggregate of approximately 7.3 million barrels of active shell capacity. The Wholesale Marketing and Terminalling segment offers marketing, transporting, storing, and terminalling refined products and services to independent third parties. Delek Logistics GP, LLC serves as the general partner of the company. Delek Logistics Partners, LP was founded in 2012 and is headquartered in Brentwood, Tennessee.

FINANCIAL RATIOS  of  Delek Logistics Partners (DKL)

Valuation Ratios
P/E Ratio 12.1
Price to Sales 1.7
Price to Book -58.6
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 8.5
Growth Rates
Sales Growth Rate -24.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -45%
Cap. Spend. - 3 Yr. Gr. Rate -15.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 6
Management Effectiveness
Return On Assets 19%
Ret/ On Assets - 3 Yr. Avg. 21.6%
Return On Total Capital -525%
Ret/ On T. Cap. - 3 Yr. Avg. 13.5%
Return On Equity -525%
Return On Equity - 3 Yr. Avg. 13.5%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 32.1%
Gross Margin - 3 Yr. Avg. 25.2%
EBITDA Margin 21.4%
EBITDA Margin - 3 Yr. Avg. 16.2%
Operating Margin 17.4%
Oper. Margin - 3 Yr. Avg. 13.3%
Pre-Tax Margin 14.1%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 14.1%
Net Profit Margin - 3 Yr. Avg. 11.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 38.1%

DKL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DKL stock intrinsic value calculation we used $590 million for the last fiscal year's total revenue generated by Delek Logistics Partners. The default revenue input number comes from 2016 income statement of Delek Logistics Partners. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DKL stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DKL is calculated based on our internal credit rating of Delek Logistics Partners, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Delek Logistics Partners.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DKL stock the variable cost ratio is equal to 90.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DKL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Delek Logistics Partners.

Corporate tax rate of 27% is the nominal tax rate for Delek Logistics Partners. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DKL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DKL are equal to 45.8%.

Life of production assets of 14.1 years is the average useful life of capital assets used in Delek Logistics Partners operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DKL is equal to 4.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-11 million for Delek Logistics Partners - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 24.602 million for Delek Logistics Partners is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Delek Logistics Partners at the current share price and the inputted number of shares is $0.8 billion.


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Stock chart of DKL Financial statements of DKL Annual reports of DKL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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