CIBC PreviewCIBC Institutional Equity Research
October 23, 2017
Rating Sector Outperform : 12-18 months Price Target $106
Boyd Group Income Fund
Third-quarter Preview
We have updated our Q3 forecasts to account for the impact of Hurricane Irma (58 locations closed for one to eight days and general business disruption), fewer single-store acquisitions (eight vs. 12 estimated) and a stronger CAD in September. Our Q3 same-store sales (SSS) growth forecast is now 1.5% (was 3.5%) and EBITDA growth is forecast at 18% to $37.2MM (were 23% and $38.9MM, respectively). We summarize our Q3 expectations below.
By rolling through a slightly stronger CAD and slightly lower Q3 earnings, our 2017 and 2018 forecasts move ~2% lower, which shaves $1 off our price target, now $106. We continue to have a positive view on Boyd and note that, despite the issues in Q3, we still forecast 18% EBITDA growth and 21% EPU growth in 2017, reflecting the company's underlying strength and generally favourable industry trends. Furthermore, the M&A outlook remains robust and the Assured deal brings the YTD total of new stores to an all-time high of 88. We maintain our Outperformer rating
Q3 Forecast: - Sales of $400.7MM (consensus $404MM), up 16% from a year ago, driven by 1.5% SSS growth and acquisitions, partially offset by unfavourable FX. U.S. sales of $341MM, up 5% Y/Y, and Canadian sales of $60MM, up 192% Y/Y on the Assured deal. - EBITDA of $37.2MM (consensus $38MM), or 9.28% of sales, up 18% from $31.6MM (9.16%) a year ago. We forecast gross margin to be down 49 bps, offset by an SG&A rate down by 61 bps. - EPU of $0.88 (consensus $0.88), up 21% from $0.72 a year ago.