PBF ENERGY INC. has been added to the Global Portfolio.
Shares Outstanding 86 million.
Enterprise Value of $3.63 billion.
EBITDA forecast for 2015: 850 million
2015 forecast EV/EBITDA ratio: 4.4X.
Proforma Shares Outstanding : 96 million.
Enterprise Value: 4.70 billion
EBITDA forecast for 2015: $1400 million.
2016 forecast EV/EBITDA ratio: 3.4X
Based upon the current and forecast EV/EBITDA ratio, and the substantial cash generating capability of the company on a pro-forma basis, a modest investment in PBF is being made on behalf of the Global Large cap portfolio. While the security in question is both cyclical and small cap, I have some degree of optimism that the company may demonstrate an ability to grow its market cap to a more reasonable estimate of 5X EV/EBITDA, ex-acquisition and based upon a successful integration.
Such an outcome should result in a share price of about $55, which represents a potential gain of 80% above the present share price.
The addition of PBF, even in a modest weight, has the potential to be accretive to the total return of the entire account. Should the thesis be wrong, such a small purchase does not appear to have the potential to be overly deleterious to the historic overall return.
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