Strategic Capital Group recommends buying shares of Murphy USA (MUSA), which operates 1200 gas stations across the Southeast and Midwest. MUSA obtains higher fuel volumes and traffic than competitors due to partnerships with Walmart, where 85% of its stations are located. The recommendation is based on projections that MUSA will expand its higher-margin store formats and sales through 200 additional Walmart locations, driving revenue growth above 7% and normalized 2015 EBITDA of $410 million. Downside risks include volatile fuel margins and potential changes to the Walmart partnership.
Almost every day, there’s news of a merger, acquisition or disposal in the oil and gas industry. To outsiders, many of the deals seem strange – a game of pass-the-parcel involving entire companies. But there are solid business reasons behind the multiplicity of deals in this most mature of industries.
See the Roland Berger Strategy Consultants (http://www.rolandberger.us/) 2014 study on The Next Challenge Of The US Auto Industry.
http://tinyurl.com/NPAutomotive
http://www.linkedin.com/in/TonyLy
https://www.facebook.com/MechanicalMarketer
PowEra Feasibility Analysis Pitch Book
Prepared By:
Justin Charron
Diana Dang
Chris Hoang
Emilia Konoeva
Eric Salkauskas
Aditya Verma
Submitted to Kris Hans, Instructor of ENTI 401 (Entrepreneurship and Innovation 401) - Opportunity Identification for fulfillment of course requirements at the Haskayne School of Business, University of Calgary in Fall 2019.
Almost every day, there’s news of a merger, acquisition or disposal in the oil and gas industry. To outsiders, many of the deals seem strange – a game of pass-the-parcel involving entire companies. But there are solid business reasons behind the multiplicity of deals in this most mature of industries.
See the Roland Berger Strategy Consultants (http://www.rolandberger.us/) 2014 study on The Next Challenge Of The US Auto Industry.
http://tinyurl.com/NPAutomotive
http://www.linkedin.com/in/TonyLy
https://www.facebook.com/MechanicalMarketer
PowEra Feasibility Analysis Pitch Book
Prepared By:
Justin Charron
Diana Dang
Chris Hoang
Emilia Konoeva
Eric Salkauskas
Aditya Verma
Submitted to Kris Hans, Instructor of ENTI 401 (Entrepreneurship and Innovation 401) - Opportunity Identification for fulfillment of course requirements at the Haskayne School of Business, University of Calgary in Fall 2019.
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Implicitly or explicitly all competing businesses employ a strategy to select a mix
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Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
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A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
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Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
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CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
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2. STRATEGIC CAPITAL GROUP
Overview
Owner and operator of 1200 gas
stations, operating since 1996.
Recently spun out of the larger E&P
parent company, Murphy Oil, in
August 2013.
Partners will Wal-Mart to develop
and operate gas stations in Wal-Mart
parking lots
Operates in two segments: retail and
ethanol. 90% of revenues come from
the retail segment.
BUY Recommendation
Current Price: $39.82
Risk/Return: -15%/+55%
Catalyst: WMT Partnership
Market Cap: $1.86bn
Daily Volume: $16mm
L9M Revenue: $14.1bn
L9M EBITDA: $287mm
3. STRATEGIC CAPITAL GROUP
Competitive Advantage
High-Traffic
Locations
Mid-Stream
Assets
Wal-Mart
Partnership
Advantage Description
85% of Murphy’s 1200 locations in the Southeast and Midwest are
located on or near a WMT parking lot.
As a result, Murphy locations obtain up to 2x the industry average in
fuel volumes and significantly higher traffic than competitors
Murphy has partnered with Wal-Mart to provide Wal-Mart
customers with cheap fuel and compete with gas offerings at
Costco, Kroger, etc.
Wal-Mart is intent on offering as at additional locations, where
Murphy will be a preferred partner.
Murphy owns seven proprietary terminals as well as an ethanol
refinery (another was recently sold).
Murphy enjoys preferred shipper status on the Colonial Pipeline
system, further allowing it to attain lower prices than competitors.
4. STRATEGIC CAPITAL GROUP
Future Opportunities
Additional
Wal-Mart
Locations
Value Description
200 additional
stores
+330 bps
margin
expansion
Reduction in
Op. Expenses
Murphy has already contracted an additional 200 stores to
be opened in partnership with Wal-Mart.
As the low-cost provider, Murphy USA is also the natural
partner for hundreds of additional locations in the Southeast
and Midwest
Management is working on transitioning from a 280 sq. ft.
kiosk to 1,200 sq. ft. stores.
Margins for the larger format store are 16.5% versus 12.8%
for the small format kiosks due to mix differences
The new, focused management team has already identified
opportunities for outsourcing back-office functions in order
to optimize operating expenses
Larger Store
Format
Optimizing
Overhead
$130mm
Murphy sold the first of its two ethanol refineries for $170mm
(for a 47% gain on 2009 purchase price of $92mm)
Murphy is looking to sell the second refinery. At $1.30 per gallon
of capacity, the Hereford plant should be worth ~$130mm
Ethanol
Refinery
Sales
5. STRATEGIC CAPITAL GROUP
Assumptions and Valuation
PT of $66/share based on
comparables
Merchandise Margin
Expansion
Revenue Growth of 7%
If we overlay the 5%
store growth Murphy
has already contracted
with a conservative 2%
of sales per store growth
driven by inflation,
revenue growth should
be north of 7% annually.
Fuel gross margins
should remain constant
while non-fuel margins
should expand 50bps as
mix shifts away from
cigarettes in the larger
stores.
Projections lead to 2015
normalized EBITDA of
$410mm.
EV/EBITDA multiple
established from trading
levels of comparables
CSY, ATD, & CASY.
EV/EBITDAIndustry 8.0x
2015Normalized EBITDA $410mm
Enterprise Value $3280mm
Diluted PTper Share $66
6. STRATEGIC CAPITAL GROUP
Management
Significant Insider PurchasesWell-Aligned Management
The CEO, Andrew Clyde, is
required to hold stock equal to 5
times his annual salary, while the
CFO is required to hold 3 times
his salary.
Both have been buying shares in
the open market to meet this
requirement
Clairborne Deming, the former
CEO and COO of Murphy Oil and
current Chairman of both Murphy
USA and Oil, bought $1.1mm
worth of stock at a price of $45.
Deming currently holds more than
$25mm of Murphy USA stock.
7. STRATEGIC CAPITAL GROUP
Risks and Downside Valuation
Wal-Mart RisksFuel Margins
Being dependent on WTI,
margins can be volatile and
generally unpredictable.
While all c-stores are exposed
to this volatility, Murphy is
particularly vulnerable
because fuel represents such
a large percentage of
revenues.
An end of the partnership
would greatly impact the
company’s ability to build
additional stores while
negatively impacting
volumes.
This is highly unlikely since
Wal-Marts need to provide
cheap gas in order to
compete with its major gas-
offering competitors.
8. STRATEGIC CAPITAL GROUP
Risks and Downside Valuation
Replacement Cost: $38/share
Given Wal-Mart’s interest in
maintaining gas stations close
to its stores, Murphy USA
should not trade at more
than a 20% discount to
replacement cost.
It costs at least $2mm to
build a Murphy USA site
including land, giving a value
of $2.4bn for Murphy USA’s
retail locations.
After the 20%, discount, we
arrive at a $34/share floor
value.
Replacement Value
Retail Location Value $2400mm
Ethanol Assets $300mm
Terminal Value $35mm
Net Working Capital ($152.8)mm
Enterprise Value $2600mm
Net Debt ($380)mm
Other Liabilities ($160)mm
Equity Value $2000mm
Replacement Value/Share $38
9. STRATEGIC CAPITAL GROUP
Catalysts
Increased
Exposure
Continued
Divestment
of non-core
assets
Progress on
store base
expansion
End of the 2-
year capital
restrictions
Given the nature of its spin-off from a larger E&P company, MUSA is
temporarily misunderstood and underexposed.
Any incremental research on the company should increase MUSA’s
exposure and cause its EBITDA multiple to expand to comp levels.
Having already sold its Hankinson plant at $170mm, the sale of the
Hereford plan should yield another $130mm of cash for Murphy.
Additional optimization of its terminal assets may identify additional
sources of cash.
The margin expansion story should be more fully appreciated as it begins
showing in MUSA’s financial statements.
Additionally, Wal-Mart has indicated that it plans to add more promotion
days in 2014 which should help with volumes.
Management has indicated that there is a two year restriction on
returning capital to its shareholders.
After this, MUSA will likely implement a dividend policy, causing further
reevaluation of the stock by a wider investor base.