Parkland Corp

Parkland Corp (TSX: PKI) is an oil & gas producer company, which is engaged in the business of supplying and marketing of fuel and petroleum products. The Group also operates a convenience store. The Group operations are located in Canada, the USA and the Caribbean. The Group divided its business into four reportable segments being Retail, Commercial, Convenience and Supply.

Recent News

On 13^th May 2020, Parkland announced the completion of the acquisition of ConoMart Super Stores through Parkland USA, its wholly-owned subsidiaries in the USA.

Financial Highlights – Q1 Financial Year 2020 (31^st March 2020, CAD, million)

(Source: Quarterly Report, Company Website) 

In the first quarter of the financial year 2020, driven by an increase in the revenue from the US-based operations for the period, the sales and operating revenue stood at CAD 4,359 million as against CAD 4,215 million in the Q1 of the financial year 2019. Due to significant increase in the expenses for the period, the company reported an LBT (loss before tax) of CAD 101 million in the first quarter of the financial year 2020 versus a PBT (Profit before tax) of CAD 119 million in Q1 FY2019. The net loss stood at CAD 74  million in the first quarter of the financial year 2020 versus a net income of CAD 91 million in the Q1 of the financial year 2019. The group’s basic loss per share stood at $0.53 in Q1 FY2020 versus basic earnings per share of $0.53 in Q1 FY2019. The group’s diluted loss per share stood at $0.53 in Q1 FY2020 versus diluted earnings per share of $0.52 in Q1 FY2019. The cash balance declined to CAD 349 million as on 31^st March 2020 versus a cash balance of CAD 244 million as on 31^st December 2019. 

Share Price Performance

Daily Chart as of 9^th June 2020, before the market close (Source: Refinitiv, Thomson Reuters)

Parkland Corp shares closed at CAD 37.35 at the time of writing before the market close on 9^th June 2020. Stock's 52 weeks High is CAD 49.22 and Low is CAD 17.57.

Conclusion

The Group introduced new technologies and techniques to upgrade its portfolio of services and products to meet the requirements of the faster pace commodity market. The Company is well-positioned to take benefits from growth trends across the energy and industrial markets. The Company has shown a decline in the financial performance for the first quarter of the financial year 2020. The top-line performance has improved, while the bottom-line performance has declined significantly and remained in the negative zone for the period. The revenue from core operations has increased with an increase in the cash balance for the period. The Group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs to preserve cash. The commodity market is extremely volatile, and on the lower side, and the company has taken additional measures to improve the business’s long-term sustainability. The management team has decided to take reduced salaries to support business continuity, and lower energy prices global will reduce the working capital requirements of the company. The group is focused on expanding its operations in the US market and have recently completed the acquisition of ConoMart Super Stores.

Based on the above rationale, we have given a “Hold” recommendation at the current price of CAD 37.35 (as on 9^th June 2020).

Disclaimer

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