Bullboard - Stock Discussion Forum Parkland Corp T.PKI

Alternate Symbol(s): PKIUF

Parkland Corporation is an international fuel distributor, marketer and convenience retailer with operations in 26 countries across the Americas. The Company’s segments include Canada, International, USA and Refining. Its retail network meets the fuel and convenience needs of everyday consumers. It also provides a range of choices to help them lower their environmental impact. These include... see more

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TSX:PKI - Post Discussion

Parkland Corp > RBC Raise Target

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Post by retiredcf on Nov 15, 2023 11:00am

RBC Raise Target

Their upside scenario target is $60.00. GLTA

November 15, 2023

Outperform

TSX: PKI; CAD 44.42

Price Target CAD 54.00 ↑ 53.00

Parkland Corp
2023 Investor Day – Continued Discipline

Our view: We attended Parkland's 2023 investor day in Toronto where management outlined an updated 5-year outlook, key strategic priorities, and a prescriptive capital allocation framework. In our view, the team did a good job underscoring historical execution, the benefits of an integrated and nimble supply network, and continued tailwinds from years of investment in key geographies. While we expect a near-term focus on leverage reduction, management re-opened the door for M&A, which likely remains a key facet of the long-term business model.

Key points:

• Five-year plan underscores continued focus on capital discipline. Management expects a ~6% CAGR in adjusted EBITDA (3-5% historical target), reaching $2.5B by 2028. This is underpinned by continued synergy capture and tailwinds from several years of prior investment across the platform. With respect to M&A, management noted a willingness to pursue accretive opportunities over time, driving potential upside to $3B in EBITDA by 2028 (Exhibit 1).

Capital allocation focused on leverage reduction and enhanced shareholder returns. Parkland outlined a disciplined capital allocation framework with 25%/25%/50% of ‘available cash flow’ ($6B through to 2028) split across shareholder returns/organic growth/deleveraging to the low-end of 2-3x target by 2025. We forecast D/EBITDA ratios of 3.0x/2.6x/2.3x in 2023E/24E/25E, broadly in-line with management’s targets. Parkland’s return of capital program is supported by the base dividend (C$1.36/share) and NCIB, through which management intends to return $1.5B to shareholders between 2024-2028.
Customer advantage central to corporate strategy. Parkland remains focused on providing a strong customer experience centered on convenience, quality food offerings, rewards and loyalty benefits, along with frictionless interactions. Continued investment into proprietary brands and site rebranding/conversions continues to support organic growth. The company also continues to build out its EV network in BC and is on track to reach 50 active sites by 2024.
Supply advantage positions Parkland as a leader in key markets. Management outlined the company’s unique supply advantage in servicing four key geographies (Exhibit 5); the common traits of each being that they are illiquid and difficult to supply, allowing Parkland to capture incremental value through its integrated supply network. The company owns and operators a mix of trucks, rail cars, vessels, pipelines, and storage facilities to source fuels and distribute to end-users in an efficient manner that is not easily replicated.
Reiterating Outperform rating. Despite strong relative performance, we believe Parkland offers a favourable risk-reward profile, particularly in the context of the updated outlook. We maintain our Outperform rating and bump our target to $54/share, mapping to 7.4x/7.0x 2024E/25E EBITDA; Parkland currently trade at 6.8x/6.5x 2024E/25E EBITDA, in-line with diversified peers (Exhibit 9).