Delek shares rise on upbeat analysts' ratings

Delek shares rise after Bank of America, Barclays give positive rating to pipeline company

Associated Press

NEW YORK (AP) -- Delek Logistics Partners LP got positive ratings from Barclays and Bank of America, and shares of the new oil and petroleum products pipeline operator rose on Tuesday.

THE SPARK: Barclays began coverage of the company with an "Overweight" rating, saying it has growth potential, stable cash flow and well-located assets. Bank of America Merrill Lynch and Simmons & Co. gave it a "Buy" rating, also citing growth potential.

THE BIG PICTURE: Delek Logistics was spun off from Delek US Holdings Inc. The shares began trading Nov. 2 on the New York Stock Exchange. They were priced at $21 in the initial public offering and gained 11 percent on their first day of trading.

Barclays and Bank of America were among the underwriters, along with Goldman Sachs and Wells Fargo.

THE ANALYSIS: Barclays analyst Richard Gross said the company "has visible growth prospects, stable cash flows and strategically located assets." He said distribution could grow 10 percent per year.

Gross wrote in a note to clients that Delek should trade at a "modest" discount to crude oil pipeline and high-growth companies because of its smaller size and slower growth, but the spread was too wide, making Delek's stock undervalued.

Similarly Bank of America's Cathleen King said the company was undervalued, given its growth potential and assets. She also said earnings from assets held by Delek US Holdings could drop down to the new partnership.

SHARE ACTION: The shares rose 83 cents, or 3.8 percent, to $22.99 in Tuesday afternoon trading.

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