FTO--cash rich refiner

**alex_li_98** Fri Nov 18, 2005 3:51 pm

FTO--cash rich refiner
With what I have learned from blast in the past year, I am trying to pull a trick myself:

BUSINESS SUMMARY (from yahoo)
Frontier Oil Corporation (FOC), an energy company, engages in crude oil refining and the wholesale marketing of refined petroleum products. The company purchases crude oil to be refined and markets the refined petroleum products, including various grades of gasoline, diesel fuel, jet fuel, asphalt, chemicals, and petroleum coke.

The reason I like FTO is
1) sector in favor: refining capacity is always in short supply
2) cash rich: $286M cash end of Q3, $5 per share, and low debt (150M long term debt, $35M current liabilities)
3) very profitable: Q3 EPS $1.91, operating income $177M, EBITDA $187M.
(above from form 10Q http://www.sec.gov/Archives/edgar/data/110430/000011043005000066/form10q.htm )
4) insider buying: CFO bought 2k shares in early Nov (though there were lot of option exercise/selling when the stock is >40).

current market cap is 1.94B, if Yahoo's full year EBITDA data of $399M make any sense (well, 187*4=748, but maybe Q3 is not normal with Katrina).
Then it should be worth 8xEBITDA for 3.2B with a 60% upside.

I got kind of excited with myself... Guys, do you see any holes? if not, cast me a vote!

Thanks,

-Alex