Alimentation Couche-Tard Inc

Alimentation Couche-Tard Inc. (TSX: ATD.A) is a Canada-based convenience stores and fuel retail company. The Company operates convenience stores in the United States, in Europe, in Asia and in Canada.

Recent Development

All of Alimentation Couche-Tard Inc. Class B subordinate voting shares converted into Class A multiple voting shares as on December 07, 2021.

On December 03, 2021, the company notified its shareholders that all of its outstanding Class B subordinate voting shares were automatically converted into Class A multiple voting shares of the Corporation on a one-for-one basis on December 8, 2021. And, All Class B Shares has been delisted from TSX at the close of trading on December 7, 2021.

Class A Shares carry 10 votes per share whereas Class B shares were carrying one vote per share

*Note: Kalkine has covered Alimentation Couche-Tard Inc. (ATD.B) shares on November 17, 2021, as a “Hold” recommendation. Since Class B shares were automatically converted into Class A multiple voting shares, therefore investors holding Class B shares as of December 07, 2021, will now be holding Class A shares. From December 8, 2021, onwards only Class A Shares of Alimentation Couche-Tard Inc is trading on the TSX under the ticker "ATD".

The closing price of Alimentation Couche-Tard Inc Class B shares as on December 07, 2021 was CAD 49.67.

Key Highlights:

• Generating Industry leading ROE (Common equity): TTM ROE (common equity) of the company stood at 21.23% significantly higher when compared to the industry peer’s median of 13.3%, implies that the shareholders of the ATD are having a competitive edge against the competition.
• Trading at a discounted multiple: From the TTM Price to Earnings multiple standpoints, ATD shares are trading at a discount to its peer’s with TTM P/E multiple of ATD stood at 15.32x whereas average peers are trading at a multiple of 19.58x, implies a discount of 22% against the peers.
• RSI 40 Support: On the last trading session, a trend reversal was spotted on the daily price chart as leading momentum indicator 14-day RSI took 40 support and bounced back, implies that the bulls are trying to get control over bears. Moreover, reversal was also supported by volume spurt.

Technical price chart (as on December 17, 2021). Source: REFINITIV, Analysis by Kalkine Group.

• Taking support near 200-day SMA: Over the past six months, ATD shares have taken multiple support near its long-term moving average of 200-day SMA and bounced back from that level. On the last trading session, its share once again took support at 200-day SMA and bounced back with above avarge volume.Once its shares crosses its short-term ressistance of 50-day SMA, we can further see some upside rally in the stock.

Technical price chart (as on December 17, 2021). Source: REFINITIV, Analysis by Kalkine Group

Risk Associated
The company is exposed to variety of risks ranging from resurgecne of COVID-19 cases, decline in fuel demand decline in same store sales, labour shortage, supply chain related issued and other macro economic risks. 

Financial Highlights: Q1FY22

Soruce: Company filing

• Total revenue during the first quarter of 2022 jumped by 39.8% to USD 13,578.9 million on a YoY basis. This was primarily driven by a higehr average road transportation fuel selling price, higher fuel demand, and net positive impact from FX translation.
• Gross profit improved by 4.5% to USD 1,159.5 million compared to USD 1,124.0 million reported in the same quarter of the previosu financial year.
• Net earnings was slightly lower at USD 764.4 million comapred to USD 777.1 million reported in Q1FY21.

Valaution Methdology (illustrative): Price-to-Earnings- based valuation

Stock recommendation

The company’s performance in the quarter just gone by was decent, support by inctease in the fuel demand across the geographies. Also, from the valuation standpoint its shares are available at a discout to its peers. Moreover, ATD shares are taking strong support near 200-day SMA and on the last trading session its shares moved up despite weakness in the broader market with above average dialy traded volume. Hence, we recommend a “Hold” rating on “ATD” shares at the closing price of CAD 47.85 (as on December 17, 2021).

1-year price chart (as on December 17, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.