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Vertex Energy Rises After $140M Asset-Sale Plan, Price-Target Lift

Craig Hallum analyst Eric Stine raised his price target on Vertex Energy to $25 from $13 and affirmed a buy rating after the company unveiled an asset-sale plan.
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Vertex Energy  (VTNR) - Get Vertex Energy, Inc. Report shares on Wednesday leaped after the environmental services company unveiled an agreement to sell some assets to Clean Harbors for $140 million.

That led Craig Hallum analyst Eric Stine to raise his price target on Vertex to $25 from $13, keeping his buy rating.

Vertex Energy, Houston, recently traded at $13.07, up 27%. They've traded on Tuesday up as much as 35% at $13.88. The stock started the year at 71 cents.

The asset sale will help Vertex become a vertically integrated producer of renewable diesel, Stine said, according to Bloomberg. And the company’s profit may surpass its target.

As for the sale, Vertex is unloading its portfolio of used-motor-oil-collection and -recycling assets to Safety-Kleen Systems, a subsidiary of peer environmental-services company Clean Harbors  (CLH) - Get Clean Harbors, Inc. Report, Norwell, Mass. At last check, CLH shares were up 0.7% at $91.40.

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The transaction is expected to close in the third quarter.

Earlier in the month Stifel raised its price target on Vertex stock to $17 from $2, maintaining its buy rating.

The investment firm moved after Vertex agreed to buy an Alabama refinery from Royal Dutch Shell  (RDS.A) - Get Royal Dutch Shell Plc Sponsored ADR Class A Report  (RDS.B) - Get Royal Dutch Shell Plc Sponsored ADR Class B Report for $75 million. Vertex will acquire the Mobile Chemical LP Refinery and associated logistics assets.

"Vertex thinks the hydrocracker conversion cost is significantly less than a greenfield project to produce renewable diesel," Stifel analyst Michael Hoffman said in a note titled in part "Did Not See this Coming."

He values the company's legacy assets at $2 and the addition of the Shell refinery at another $15, with "an assumption for some walk down of subsidies."