TSX:LIQ.DB.B - Post by User
Post by
Jmark1on Mar 11, 2016 2:37pm
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Post# 24649402
What BNS had to say about the Qtr.
What BNS had to say about the Qtr.
BNS thoughts on latest report. Sector Perform with 1 year target of $7.00
Liquor Stores reported in-line Q4/15 results. Adj EBITDA ($14.0M vs. us at
$14.0M and consensus at $13.6M) and adj. EPS ($0.24 vs. us at $0.24 and
consensus of $0.26) met expectations.
LIQ reduced its annualized dividend from $1.08/share to $0.36/share (two-thirds
cut) and delayed the implementation of its ERP system.
Canadian SSS growth improved sequentially to +0.3% from -0.9% last quarter,
ahead of our estimate of -2.0%. LIQ expects further downward pressure on
same-store sales in all Alberta markets in 2016, especially at the
resource-dependent locations (declined between 5% and 15%).
We have lowered our estimates to account for: (1) lower Canadian SSSG assumption
and (2) gross margin compression (driven by more promotions). We have also
reduced our valuation multiple to 8x to account for lower earnings visibility
stemming from a weakening outlook in Alberta. Consequently, or new one-year
target is $7/share.
We expect the $18M dividend reduction coupled with the ERP scale-back to reduce
leverage to 3.4x exiting 2016 (from 4.0x pro forma in Q1/16) and to improve the
2016 payout ratio to 52% (from 102%).
While we view the dividend cut as prudent, current valuation keeps us on the
sidelines: LIQ shares are trading at 9.4x EV/EBITDA (2016E) or a modest premium
to the Specialty Retailing peer group despite lower return metrics, weaker FCF
profile, lower organic growth, and higher leverage.