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 Nov 16, 2020 8:31am

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Post# 31905376

TD 2

Park Lawn Corp.

(PLC-T) C$27.98

Q3/20 Results in Line; Expecting Organic Strength into H1/21 Event

Park Lawn reported Q3/20 results yesterday after market close and held its quarterly conference call this morning.

Impact: NEUTRAL

Our overall outlook is largely unchanged following the Q3/20 results and conference call. Revenue performed in line with our expectations, with Park Lawn seeing strength in both at-need volumes (market share gains and direct and indirect COVID-19 impacts) and pre-need cemetery sales (COVID-19 driving individuals to evaluate post-death alternatives), leading to 11% organic growth. While EBITDA margins were 110bps below our forecast, driven by a re- acceleration of marketing spend, we believe Park Lawn remains on-track for 26% EBITDA margins exiting F2022 and would note that margins were relatively consistent both y/y and q/q.
Revenue in Q3/20 was $83.8mm (up 26% y/y), versus our estimate/consensus of $83.7mm/$83.3mm. Adjusted EBITDA (net of NCI) was $19.1mm (up 26% y/y), versus our estimate/consensus of $20.0mm/$19.4mm.
Looking ahead, we believe organic growth rates should remain strong through at least Q1/21, particularly against the backdrop of rising COVID-19 case counts, which we expect will continue to drive both elevated at-need and pre-need sales. We believe comparables will become more challenging in H2/21, but expect normalization of average revenue per call to be a partial offset.
Our F2020 and F2021 EBITDA estimates are largely unchanged following the quarter, with modestly lower assumed margins (24.2% in F2021 vs. 24.6% previously) offset by the recently announced acquisition of JF Floyd (link).
We believe M&A will remain the most material growth driver moving forward and expect Park Lawn to remain active on M&A near-term. We estimate pro- forma available liquidity for Park Lawn is ~$136mm and pro-forma leverage (incl. debentures and leases) is ~2.7x. Leverage for compliance purposes at the end of Q3/20 was only ~1.5x, well below covenants.

TD Investment Conclusion

We reiterate our BUY recommendation and $33.00 target price. We continue to view Park Lawn as a high-quality company in a recession-resistant business with a favourable industry backdrop (including demographic tailwinds), a strong near- and medium-term outlook, ample opportunities and capacity for growth through M&A in its highly fragmented industry, and a justifiable valuation.