Cahaba Research
Value, growth at reasonable price, long-term horizon

CST Brands: Valero's Spin-Off Is Currently Undervalued And Under-Earning

Investment Recommendation

I believe that CST Brands (CST or the "Company") is undervalued and under-earning relative to peers and the Company's own potential. After a spin-off from parent company Valero, CST Brands is now the second largest independent convenience store retailer. The Company is positioned in the relatively strong Southwestern U.S. and Eastern Canada markets and has significant opportunities for roll-up acquisitions in these regions. CST Brands sells in-store merchandise and motor fuel through its company-operated convenience stores, fillings stations, and cardlocks - a network, which at the end of 2012, totaled 1880 store locations.

The convenience store industry is the single largest retail sub-sector - 35% of the retail universe in the U.S. - according to the Association...

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