Amit Kumar Singh

Assessment of Core-Mark Holdings’ business model

• High Distribution Capabilities

• Innovative and Flexible
• Excellent Management
• Cigarettes
• Food • Vender Consolidation Initiative
• Candy • Studying Consumers behaviour
• Other tobacco products and help C-Stores place goods
• Health, beauty & general strategically.
• Beverages • Largest Fleet and distribution
• Equipment/other centres. Nearest compotator is
Mclane Co. Inc.
Company/ • Continuous growth in top line and
trying to increase its portfolio.
Mini Stores/ C-
Stores whole sellers
• Employee's state it’s a challenging
job as they need to be on time
and maintain good customer
relationship.
Core-Mark
• The employee(driver) pay is less*
below industry average.
 Profitability Ratio Financial Leverage Ratios Sales and Gross Profit
49.84
12000.00 11069.40
12.00% 10.43% 50.00 0.30 10280.10
9.59% 45.00 41.79 9767.60
9.26% 0.24
10.00% 8.47% 37.59 36.76 0.25 10000.00 8892.40
40.00 35.63 8114.90 10431.50
8.00% 6.98% 0.19 32.13 9706.40
35.00 0.20 8000.00 9230.50
5.76% 28.37 27.91 0.17
5.35% 5.36% 5.50% 5.58% 30.00 26.48
0.16 8415.60
6.00% 0.14 7680.80
25.00 21.25 0.15 6000.00
3.22% 3.35% 3.50% 3.48% 3.65%
4.00% 20.00
15.00 0.10 4000.00
2.00% 0.32% 0.38% 0.43% 0.42% 0.47%
10.00 0.05
0.00% 2000.00
5.00
2011 2012 2013 2014 2015 0.00 0.00 0.00
2011 2012 2013 2014 2015 1 2 3 4 5
Gross Profit Margin Net Profit Margin
ROE Operating Margin Total Debt to Equity Interest Coverage Ratio DSCR Net sales Cost of goods sold Gross profit

Efficiency Ratio Efficiency Ratio Growth

0.05 0.05 12000 11069.40 12%
0.05 0.04 0.05 0.04 10280.10
0.04 0.04 0.04 0.04 9767.60
0.04 0.04 10000 8892.40 10%

Growth percentage
10% 10%
0.04 0.04 8114.90
0.03 0.03 0.03 0.03 8000 8%

In Millions
0.03 0.03 0.03 0.03 0.03 0.03 8% 8%
0.03 0.03
6000 6% 6%
5%
0.02 0.02 5%
4000 4% 4%
0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
0.01 0.01 2000 870.20 919.20 956.80 1029.60 1077.30 2%

0 0%
0.00 0.00
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Year
Accounts Receivable Turnover Accounts Payable Turnover Accounts Receivable Turnover Accounts Payable Turnover
Inventory Turnover Inventory Turnover Total assets Net sales YoY growth YoY growth

The Ratio’s show that the company have been performing consistently over the period and have been expanding using its
business strategies.
What is your assessment of management’s strategy to create shareholder value
and how would you assess if management has indeed created shareholder value
thus far (do not rely on the stock price)? Please support your answer with a
quantitative and qualitative assessment
• The management did create value for it’s shareholders by it’s strategy

Net Net approach 2011 Net Net approach 2015

( All figures in Millions except value per share) ( All figures in Millions except value per share)

Current Assets 702.20 Current Assets 837.30

Current Liabilities 370.90 Current Liabilities 459.60
Long Term Liabilities 72.60 Long Term Liabilities 71.00
Net-Net Value 258.70 Net-Net Value 306.70
No. Of Shares Outstanding (in Million) 23.16 No. Of Shares Outstanding (in Million) 46.31
Value Per Share 11.17 Value Per Share 6.62
Current Market Value Per Share 9.18 Current Market Value Per Share 48.34
Recommendation Buy Recommendation Don't buy

Please refer the excel for valuation

 Current valuation make sense to you as an investor? Why or why not?

• Going by Benjamin Graham’s Net Net approach the company is over valued.
• Even Going by Asset based valuation the company is over valued

• But the way company has come back from bankruptcy in 2003 and become one of the
largest player in Wholesale industry is remarkable.
• The Company’s management has played a key role here in creating value.
• As long as the management keeps taking good strategic decisions such as the Acquisitions
and mergers, vendor consolidation , Focus marketing and Fresh ; which is creating value
for the share holders buy capturing the market.
 As a private equity investor, what is the maximum price you would be
willing to pay to acquire Core-Mark Holdings?

• The maximum Price to acquire Core-Mark shouldn’t exceed 6±10%(5.27-6.73) Million

going by asset based valuation.
*The brand value of Core-Mark is not included.
• The reason I’ve used assed based valuation is because
• Even thought the cash flows look visible but still the market it operates in is very dynamic, depends on
consumer behaviour and government policies as well as the fuel prices. So using DCF and trying to
predict the cash flow for such industry would not be the right method.
• Net-Net approach and Asset based valuation method value appears to be a better methodology for this
industry as their inventory holding time is less and it’s not a asset intensive industry.
Source
• Company Annual report
• Investor conference
• Company website
• Grant Thornton Wholesale and Distribution Industry Key Performance Indicators (KPIs)