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Alimentation Couche-Tard Inc. (ATD)
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Caseys General Stores Inc. (CASY)
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CrossAmerica Partners LP representing limited partner interests (CAPL)
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Murphy USA Inc. (MUSA)
Q: This US equity just reported and has corrected. The business model is similar to Couche Tard but it is much smaller. It pays a 10% dividend. If the share price drops under $20 I want to buy but would ask for your analysis on the company, ability to pay the generous yield, debt, guidance, valuation, etc. It seems to have a see-saw long term chart. Appreciate your opinion on a buy here.
5i Research Answer:
CAPL is trading at 11.1x EV/EBITDA, on par with ATD, which is also trading at 11.6x EV/EBITDA. That said, CAPL has two main businesses, the wholesale distribution of fuels and the retail segment (convenience store concept). We prefer a pure player in the convenience store field such as CASY or MUSA. In addition, CAPL has run a leveraged balance sheet over the years; the net debt/EBITDA is around 6.0x. Although the dividend in the trailing twelve months ($80M) is covered by a cash flow of $111M, we think investors need to get more comfortable with a leveraged balance sheet before investing in CAPL.