CASEYS GENERAL STORES INC CASY S
November 09, 2016 - 5:26pm EST by
Shooter McGavin
2016 2017
Price: 116.61 EPS 0 0
Shares Out. (in M): 39 P/E 0 0
Market Cap (in $M): 4,568 P/FCF 0 0
Net Debt (in $M): 700 EBIT 0 0
TEV ($): 5,267 TEV/EBIT 0 0
Borrow Cost: General Collateral

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  • Regulatory Downside Risks
  • Regulatory Change
 

Description

This is a quick Trump is our next POTUS trade idea, which will inevitably get low ratings, but that I think will earn a decent IRR:

Short Casey's General Stores because 10-15% of their EBT is tied to a poorly thought out Renewable Identification Number (RIN) trading system, erected by the EPA, that will likely be reformed under a Trump administration.  Icahn has been a vocal opponent of the current RIN system (see: https://www.dropbox.com/s/emugyp2g9o7hkr1/Icahn%20EPA%20letter%20re%20RINs.pdf?dl=0).  Read any independent refinery's conference calls to hear constant bemoaning from CEOs.

Analysts have the company growing earnings up and to the right.  That might prove difficult should the RIN windfall go away.  Stock trades for 17.2x FY19 Adj EPS.

Today (for those reading in the future, the day after Trump's surprise victory), independent refineries rallied (CVI/HFC up 24%/16% respectively) and MUSA was off by 6%.  CASY was up 34bps.

Also, we're far off from autonomous driving, but as ride sharing services continue to grow, is it crazy to think the US is oversupplied with C-Stores?  As Electric Vehicles gain share and fuel efficiency rules become more stringent for combustible engines, is it crazy to think retail fuel distribution volumes will be under pressure over the medium term?

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

Murca becomes great again.

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    Description

    This is a quick Trump is our next POTUS trade idea, which will inevitably get low ratings, but that I think will earn a decent IRR:

    Short Casey's General Stores because 10-15% of their EBT is tied to a poorly thought out Renewable Identification Number (RIN) trading system, erected by the EPA, that will likely be reformed under a Trump administration.  Icahn has been a vocal opponent of the current RIN system (see: https://www.dropbox.com/s/emugyp2g9o7hkr1/Icahn%20EPA%20letter%20re%20RINs.pdf?dl=0).  Read any independent refinery's conference calls to hear constant bemoaning from CEOs.

    Analysts have the company growing earnings up and to the right.  That might prove difficult should the RIN windfall go away.  Stock trades for 17.2x FY19 Adj EPS.

    Today (for those reading in the future, the day after Trump's surprise victory), independent refineries rallied (CVI/HFC up 24%/16% respectively) and MUSA was off by 6%.  CASY was up 34bps.

    Also, we're far off from autonomous driving, but as ride sharing services continue to grow, is it crazy to think the US is oversupplied with C-Stores?  As Electric Vehicles gain share and fuel efficiency rules become more stringent for combustible engines, is it crazy to think retail fuel distribution volumes will be under pressure over the medium term?

    I do not hold a position with the issuer such as employment, directorship, or consultancy.
    I and/or others I advise do not hold a material investment in the issuer's securities.

    Catalyst

    Murca becomes great again.

    Messages


    SubjectMarket Reaction
    Entry11/09/2016 07:03 PM
    MemberAres

    Hi Shooter, this is an interesting idea! Any plausible explanation about why Caseys was slihgly up today while even MUSA was donw 6% (I am saying "even" because based on my research of the comapny back in 2013 at the time of the spin off, it was benefitting from RIN but it is core business was very solid). 

    Thank you!

    Ares


    SubjectRe: Re: Market Reaction
    Entry11/09/2016 09:52 PM
    MemberAres

    Thank you for digging further and sharing this, Shooter.  I did not realize that RIN as % EBT went above 50% in 2015 (well, I looked at it in 2013 and in 2014 so that makes that I was not aware of what happened in 2015!).  

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