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Busted Cemetery Business With Lots Of Red Flags, Confusing Accounting, Trading At 14% Yield.

Published Thu, 11 May 2017 08:12:58 -0400 on Seeking Alpha

The Company
StoneMor operates 317 cemeteries and 105 funeral homes in 28 states and Puerto Rico. The company provides a complete range of funeral merchandise and services, sold both at the time of need and on a pre-need basis. The company manages more than $840mm in trust assets that ensure the delivery of merchandise and perpetual care of burial plots and vaults. In the twelve months through September 2016, the company performed over 53k burials and over 16k funeral service calls. STON went public in 2004 and has since acquired 185 cemeteries and 98 funeral homes at multiples between 4x-6x EBITDA.[i]
STON has an excess of investment red flags:
Dividend cut in half, Recent financial restatements (with qualified letter from auditors), One quarter behind on SEC filings (and counting), and Both the CEO and CFO have left within the last three months. In addition, the business economics are masked by some of the most unique and confusing accounting we have seen.
Yet, we think the stock is worth upwards of $15/unit (compared to a current price of ~$9.00; 66% upside). In addition, we think the downside is protected by liquidation value of at least $11/unit (22% upside). Finally, investors get paid a current yield of 14%.
We believe:
STON is not a Ponzi-scheme. They DO need access to capital markets to fund both growth capital and working capital (because they finance pre-need sales and have legal requirements to fund merchandise trusts). They do NOT raise... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
STONEMOR PARTNERS L.P. 1.39   0.0 -2.69 0.00 102.33


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