Park Lawn Corp.
(PLC-T) C$23.56
Nashville Investor Day and Property Tour Highlights Event
Last week, PLC hosted analysts, investors, and other stakeholders for presentations and tours of two properties in Nashville.
Impact: NEUTRAL; target price declines on more conservative estimates and lower multiple
A key focus of the investor day was meeting with independent funeral/cemetery owners who have sold to PLC to better understand their process and reasoning for partnering with PLC versus a competitor (or private equity). Discussions made it clear that sellers value PLC's awareness of the need to balance caring for people/families, while also driving prudent economic decisions. Our sense following the day is that PLC is fostering a "family-like" culture, focused on empowering independent operators, which we believe provides a relatively unique consolidator value proposition.
As part of the events, management did not provide new financial targets or current performance updates. However, it reiterated that following the challenging Q2/22, it does not believe anything is fundamentally wrong with its assets and that much of the issues are related to temporary market conditions and a loss of focus by PLC (employee fatigue, reliance on at-need to drive pre-need, and the rapid pace of consolidation), which can be recovered without aggressive changes in its cost structure or service delivery model. Looking forward, management indicated that it has made organizational changes to refocus its sales teams and implemented additional KPIs; the launch of the new FaCTS system will allow for real-time visibility by location (i.e. daily monitoring of commissions, average revenue per contract, bulk sales, etc.), which should allow for greater corporate-level intervention. Furthermore, management reiterated that given the sales teams are primarily commission-based, they should be inherently motivated to return to outbound initiatives, now that the COVID-19-fuelled inbounds have tapered.
TD Investment Conclusion
Overall, we had a broadly positive takeaway from the investor day regarding PLC's facilities, its M&A agenda, organic growth opportunities, and its ability to improve performance versus the weak Q2/22. However, we have tempered our estimates to reflect a more conservative stance around the pre-need sales environment, particularly across the lower-income consumer segment, reflecting escalating macroeconomic headwinds and given uncertain at-need volumes as COVID-19-related impacts subside. We have also reduced our target multiple to 12.0x 2023E EBITDA (from 13.5x previously), reflecting the broader risk-off market sentiment.