Park Lawn Corp T.PLC

Consumer Cyclical Personal Services

Park Lawn Corporation is engaged in providing goods and services associated with the disposition and memorialization of human remains. The Company and its subsidiaries own and operate businesses, including cemeteries, crematoria, funeral homes, chapels, planning offices and a transfer service. Its primary products and services are cemetery lots, crypts, niches, monuments, caskets, urns and other merchandise, funeral services, after-life celebration services and cremation services. Its products and services are sold on a pre-planned basis or at the time of death. It has one stand-alone funeral home located in Durham, North Carolina; one stand-alone funeral home and one on-site funeral home and cemetery located in Abingdon, Virginia; eight stand-alone funeral homes, two stand-alone cemeteries and one on-site funeral home and cemetery located in and around the Savannah, Tennessee area; three stand-alone funeral homes located in Brampton, Woodbridge and Toronto, Ontario and more.

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Park Lawn Corp

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Post by retiredcfon Aug 17, 2020 8:56am

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Post# 31416695

TD Upgrade

As anticipated. GLTA

Park Lawn Corp.

(PLC-T) C$28.03

Faster-than-Expected Rebound and At-Need Volumes Drive Q2 Beat

Event

PLC reported Q2/20 results yesterday after market close and held its conference call this morning. Revenue was $84.7mm (up 45% y/y), versus our estimate of $71.6mm (consensus: $70.5mm). Adjusted EBITDA (net of NCI) was $19.5mm (up 50% y/y), versus our estimate of $13.0mm (consensus: $15.1mm)

Impact: POSITIVE

PLC exceeded our expectations in nearly all facets of its business. Pre-need cemetery sales (which we particularly concerned about) rebounded from down ~35% at the start of the quarter to nearly flat at quarter-end; at-need volumes were much stronger than we expected (in part due to higher volumes in COVID-19 hotspots); and margins also held in much better than we expected (in large part due to the higher-than-anticipated revenue).
Looking ahead, we expect much of this strength to carry into Q3/20. At-need volumes are currently up y/y in about half of PLC's properties, pre-need cemetery sales activity continues to recover (with COVID-19 serving as a triggering event), and we expect average revenue per call to continue to normalize as gathering restrictions continue to ease and previously deferred memorials take place. Additionally, management remains focused on driving EBITDA margins to the F2022 target of 26%, with continued progress expected as integration efforts continue.
The company has resumed its growth activities, including organic growth projects and re-engaging prospects on M&A. With additional financial flexibility following the recently completed debenture offering, we anticipate that PLC will remain very active on M&A near-term, with PLC resuming discussions with targets that were put on hold due to COVID-19, while also seeing an influx of new opportunities. Additionally, the company's largest capital project, an on-site funeral home in Toronto, is expected to be completed in Q1/21.
PLC exited the quarter with leverage of 2.8x (1.5x for covenant purposes) and ~$175mm of available liquidity to pursue its growth objectives.

TD Investment Conclusion

We reiterate our BUY recommendation and have increased our target price to $33.00 (from $28.00). We continue to view Park Lawn as a high-quality company in a recession-resistant business with a favourable industry backdrop, a strong medium- term outlook, ample opportunities for growth through M&A, and a reasonable valuation.