As we mentioned in yesterday’s Funeral Director Daily, the earnings season is upon us for public companies to report their operating results for the 3 months ended September 30, 2019. On November 7 we know that cemetery and funeral home owner and operator StoneMor Partners LP will give us those numbers and do know that a lot of people in the industry are looking for those numbers to see if the company is moving in the right direction in their transformation plan.
We also know that the people at StoneMor have been working very hard to move StoneMor Partners into a more efficient company. Back in June they issued a power point presentation, that you can see here, on their efforts and how they are going about trying to transform the company. In that report they concluded that the company “had a substantial asset base”, that the company “had a bloated cost structure” and that the company “had 35% of assets that were weak performing and would become candidates for divestiture if they could not generate cash flow”.
Since that time, StoneMor it has also been reported that Johnson Consulting Group would be retained to help the company look at possible divestitures.
The company’s stock price has consistently been under $2 per share and reached a 52-week low of $1.00 per share on October 25 before bouncing up to close at $1.05 per share on that day. A share price of $1.05 gives StoneMor Partners a market capitalization value (number of shares x share price) of only $46.7 million. When you consider that the company operates (and owns most of) 411 properties that comes to a value of only about $114,000 per property. Anybody who is in the funeral/cemetery business would agree that is an incredibly low value for any type of funeral or cemetery property.
Of course, we all know that it is the investor in the free market that buys and sells stock that gives the company that value. We are guessing that the drop in revenues and the increase in losses is what is driving this price lower. Within the last year, StoneMor Partners sold for over $5 per share so, in essence, the company has lost about 80% of its value in that time period.
However, we also came upon this late September report from Moody’s. Here are a couple of items we noticed in that report.
- The report expects up to $15 million of cash losses through the end of 2019.
- The report expects that StoneMor’s revenue will grow and that free cash-flow will be slightly positive by the end of 2020.
- The report states that StoneMor Partners has a backlog of over $900 million of preneed cemetery and funeral sales.
To us, that number — $900 million of backlog — is an incredibly positive number for the future of StoneMor. Again, using the number of properties of 411. . .that is an existing preneed volume of about $2.18 million per facility. In addition, we believe that annual fiscal revenue numbers for StoneMor Partners will come in at about $305 million for fiscal year 2019. The $900 million backlog number would equate to about three years of revenue for the company that it appears that they will secure in the future. We believe that is a great asset to build upon.
So, there you have it. We believe StoneMor Partners has a solid plan backed up by some solid assets. The big question will be time. . . will they be able to shed expenses and raise revenues and liquidate non-performing assets fast enough to get to that positive cash-flow position before they run out of operating capital.