Bullboard - Stock Discussion Forum 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... see more

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TSX:PLC - Post Discussion

Park Lawn Corp > TD

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Post by retiredcf on Nov 14, 2022 8:29am

TD

Maintain their $34.00 target. GLTA

Park Lawn Corp.

(PLC-T) C$25.67

Challenging Environment, but PLC Well Positioned to Navigate Event

We are updating our estimates following the release of PLC's Q3/22 results and conference call on November 10. Q3/22 adjusted EBITDA of $18.2mm was ~6% above TD/consensus at $17.2mm/$17.0mm, reflecting slightly stronger- than-expected revenues and adjusted EBITDA margins: 22.4% (TD/consensus: 21.6%/22.5%). First look here.

Impact: NEUTRAL

Overall, Q3/22 results were better than feared, with PLC reacting quickly following the weak Q2/22 to address inflationary headwinds and ramp up sales initiatives to offset the normalizing at-need demand post-COVID-19. Revenue increased 10.7% y/y, reflecting acquisitions, offset slightly by negative 0.8% organic sales. Organic results were impacted by lower at-need demand, with PLC's call volumes down 8% y/y (but outperformed recent CDC data, which shows a 14% decline in the number of U.S. deaths) and a 1.9% decline in the average revenue per call (partly mix). However, pre-need sales increased 4.4% y/y, bolstered by large bulk sales in certain cemeteries; management acknowledged that bulk sales cannot be relied on as a consistent performance driver but indicated that between offering discounts/incentives and engaging more actively with these groups, it can influence the rate at which deals are completed. Furthermore, management believes opportunities exist to enhance its sales across all customer segments.

Margins: PLC has enacted additional operating cost strategies and increased pricing, which are expected to incrementally improve near-term margins. However, it is taking a cautious approach to pricing, to avoid losing market share or customer trust. Encouragingly, management continues to see 26% EBITDA margin as achievable at current death rates and with its existing businesses, but it anticipates mix upside as it continues to upgrade the portfolio through acquisitions. Management expects to meet its acquisition target of deploying $75mm-$125mm in each of 2022 and 2023.

TD Investment Conclusion

In our view, near-term results are likely to remain volatile as the industry progresses through the post-COVID-19 normalization period, and given potential impacts of a recession on pre-need sales. However, we see PLC as well positioned, given its solid balance sheet and ample opportunities/capacity to grow through M&A. Ultimately, we continue to view death-care services as largely recession-resistant, with favourable demographic tailwinds fast approaching (i.e., Baby Boomers).

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