Read their reasoning. They are not down on the entire sector or VLO for that matter, it's just a relative reporting about VLO v. MPC and others.
They like Valero, they just like the others better.
We believe that 2013 will be important for VLO owing to a surge in crude moving down to the Gulf and to the contribution of VLO’s hydrocrackers (around $1bn-plus of EBITDA). Widening Gulf crude discounts and hydrocracker EBITDA in 2H13 provide offsets to the headwinds of narrower WTI-Brent spreads, lower expected international margins, the dreaded RINs and somewhat narrower near-term heavy crude differentials. VLO has decent upside at current levels, but less than our preferred picks.
Gulf Is Good, but VLO has Less High Multiple Assets than Peers: Logistics and retail form a much higher weight in peers’ enterprise value than at VLO. When we strip these high multiple businesses out of the group, the peers trade on 2.3-3.6x our mid-cycle EBITDA compared with VLO on 3.6x. None of these multiples are
expensive, but VLO is at the higher end of the group.
Less Free Cash Generation Also: Despite a view that Gulf Coast crudes will fall in price to the benefit of VLO, we forecast lower free cash generation at VLO while the company invests in self-help projects. Lower free cash generation and a more levered balance sheet suggest there is less room for buybacks versus peers.
What Could Change Our View: VLO has the most leverage to the possibility that surging supply from the Eagle Ford, Permian and Cushing pipes will drive Texas crude prices well below Brent. However, this needs to be balanced versus the under-appreciation of logistic assets within peers.
NS stands for non-standard. A standard VLO option has 100 shares per contract. The NS option has 100 shares of VLO + 11 shares of CST. However, per the Option Clearing Corporation memo, they need to determine the cash value of the 11 shares to determine the NS option value. As I read it, they haven't done that yet, hence no volume today. I'm guessing this gets done today.
Going forward, there will be two classes of options, Standard and Non-standard until all the non-standard expire. That said, non-standard options tend to be more thinly traded.
1) 100 Valero Energy Corporation (VLO) Common Shares
2) 11 CST Brands, Inc. (CST) Common Shares
3) Cash in lieu of approximately 0.11111111 fractional CST shares
Until the cash in lieu amount is determined, the underlying price for VLO1/2VLO1 will be determined as follows:
VLO1 = VLO + 0.1111111111 (CST)
The VLO and CST components of the VLO1/2VLO1 deliverable will settle through National Securities Clearing Corporation (NSCC). OCC will delay settlement of the cash portion of the VLO1/2VLO1 deliverable until the cash in lieu of fractional CST shares is determined. Upon determination of the cash in lieu amount, OCC will require Put exercisers and Call assignees to deliver the appropriate cash amount.
Go to the Options Clearing Corporation and search VLO. Read the memo. Looks like they will first need to confirm the cash value of the CST portion before price is set on the VLO1 options. Hence no one trading.
No trading on those, either. I'm IM'ing my broker as we speak. Should be interesting to see how they settle out today.
Sentiment: Strong Buy
Fan, you should just cut and paste your posts from a year ago. Same old manipulation game by Uncle Scam.