{ "docId": "019dd923-622c-750b-8b95-52ec3864d334", "docSlug": "a13d7a7a16ca", "documentTitle": "Parkland Corporation (PKI)", "authorId": "27_Engine_Capital", "authorName": "Arnaud Ajdler", "documentKindSlug": "shareholder-letter", "documentKindLabel": "Shareholder letter", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2023-03-22 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 2, "pageCount": 6, "prevPage": 1, "nextPage": 3, "slideType": "closing_ask", "function": "state_next_steps", "density": "overcrowded", "nDataPoints": 6, "notes": "This is a text-heavy slide from an activist investor presentation (likely Engine Capital or similar) outlining a thesis for value creation.", "elementsJson": [ "paragraph", "numbered_list", "footnote" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b95-52ec3864d334/2", "deckHref": "/decks/019dd923-622c-750b-8b95-52ec3864d334", "deckJsonHref": "/decks/019dd923-622c-750b-8b95-52ec3864d334.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b95-52ec3864d334#slide-2", "components": [ { "bbox": null, "kind": "callout", "text": "Therefore, if Parkland wants to be valued like a pure play fuel and convenience retailer, it should simply become a pure play fuel and convenience retailer.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-203f-7169-9f99-126c4737dbc3", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.13, "w": 0.78, "x": 0.11, "y": 0.75 }, "kind": "list", "text": "1. Immediately start exploring all strategic alternatives for Parkland, including evaluating the sale or spinoff of non-core assets with the goal of becoming a more focused fuel and convenience retailer. 2. Adhere to best corporate governance practices by refreshing the Board and adding directors with convenience merchandising and capital allocation experience. 3. Improve the Company's compensation framework to better align management's incentives with shareholder's interests.", "attrs": null, "subkind": "numbered", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "88c966ad-6f3b-4839-9700-f0ca83c00e67", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "EV-to-EBITDA: 6.5x", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-203f-7169-9f99-15eeaa9d7f06", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.16, "w": 0.78, "x": 0.11, "y": 0.28 }, "kind": "paragraph", "text": "Since its creation, Parkland has pursued an aggressive M&A strategy and accordingly, gained significant scale and supply advantages. The Company today considers this vertically integrated supply strategy as one of its core competitive advantages. In its pursuit of this strategy, Parkland has accumulated a range of assets that are not typically owned by pure play fuel and convenience operators. We believe these assets create significant complexity and detract from the Company's underlying valuation leading investors to view Parkland as a conglomerate with disparate assets, instead of a pure play convenience retailer. Conglomerates typically trade at a steep discount to the sum of the parts – and Parkland is no exception.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "712cea96-480e-4461-af08-2c02005df8e7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.14, "w": 0.78, "x": 0.11, "y": 0.45 }, "kind": "paragraph", "text": "The reason investors are willing to assign high multiples to pure play fuel and convenience retailers is because these businesses are stable, predictable and cash flow generative. These same investors are not willing to value Parkland in the same way or take the time to analyze Parkland since it also owns several other assets, such as a volatile and more capital-intensive refinery, and low growth commercial assets, such as heating oil and propane distribution businesses. Therefore, if Parkland wants to be valued like a pure play fuel and convenience retailer, it should simply become a pure play fuel and convenience retailer.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9947d9f4-cc39-455a-ba63-b7cc333526e5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.78, "x": 0.11, "y": 0.09 }, "kind": "paragraph", "text": "As a result of this sustained underperformance, Parkland is currently trading at a considerable discount to its retail peers and intrinsic value. The Company has a market capitalization of around $4.9 billion and an enterprise value of approximately $10.4 billion, implying a 2023 free cash flow yield of around 15%, a 2023 price-to-earnings multiple of around 12x and a 2023 EV-to-EBITDA multiple of around 6.5x. These multiples are too low on both an absolute and relative basis. By comparison, Alimentation Couche-Tard trades at a 2023 price-to-earnings multiple of around 16x and a 2023 EV-to-EBITDA multiple of around 9.5x.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a38fc811-bd5c-4efb-aace-db459317a29e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.78, "x": 0.11, "y": 0.6 }, "kind": "paragraph", "text": "The complexity of Parkland's business can be best evidenced by the wide list of companies the Company uses in its management information circular to establish its peer group for compensation purposes. The peer group includes (among others) companies as diverse as convenience retailers (Murphy USA, Casey's General Stores), a refiner (Delek USA), pipeline operators (Magellan Midstream Partners, DCP Midstream), utility and energy companies (Emera, Algonquin Power & Utilities, Canadian Utilities), a logistics company (TFI International), a natural gas producer (Keyera) and food retailers (Empire Company, Metro).", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "cdeb3469-5202-4643-9e23-065381ae89c1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.04, "w": 0.78, "x": 0.11, "y": 0.91 }, "kind": "source-note", "text": "2 P/E and EBITDA multiples per CapitalIQ. 3 Complete list of peers can be found in the Company's 2022 Management Information Circular.", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "78527c06-7097-48c4-aa10-7d5839bf25e3", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "breakup-spinoff", "slug": null, "matchId": "7597fbf8-146e-4de0-b06c-b2b8f48c8b00", "evidence": "Advocating for sale or spinoff of non-core assets to unlock value.", "confidence": 0.9 } ], "arcBeats": [ { "to": 2, "from": 1, "beatId": "0fbb900c-829c-4c84-b14b-69fe50366dd7", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Problem & Complication", "beatSlug": "consultants-gambit-problem-complication", "evidence": "The document presents Parkland's underperformance and the Board's governance issues.", "position": 0, "confidence": 0.8, "parentBeatName": "Complication", "parentBeatSlug": "complication" } ], "loops": [ { "to": 2, "from": 2, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "39cb4992-d80e-4f2a-ada1-ad02d6f43abf", "evidence": "The document emphasizes the consequences of Parkland's underperformance.", "position": 0, "objective": "Highlight the cost of inaction", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.7, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }