Alimentation Couche-Tard (ATD.B)
By J. Royden Ward, Expert Analyst, Cabot Benjamin Graham Value Investor
From Cabot Wealth Advisory 7/16/13 Sign up for free Cabot Wealth Advisory
In keeping with my theme of buying low and selling high, I am recommending Alimentation Couche-Tard now. Couche-Tard, a Canadian company, has an astute management team and is expanding rapidly through acquisitions. The company’s shares trade only on the Toronto Stock Exchange.
Alimentation Couche-Tard ‘B’ (ATD.B) is Based in Laval, Quebec, and operates a chain of convenience stores, specializing in the sale of quick purchase convenience items, gas and fast-food.
Alimentation Couche-Tard operates 12,500 stores throughout much of the world under the Circle K, Couche-Tard, Mac’s, and Statoil brand names. A majority of the stores are company-owned, and most sell gasoline. Couche-Tard differs from other convenience store operators, in that the company is worldwide, and the company is viewed in many parts of the world as a seller of transportation fuel with a minor convenience store business on site rather than a convenience store with gas pumps on site.
Couche-Tard’s huge appetite for gasoline places the company in position to negotiate favorable prices when buying fuel from major oil companies such as ExxonMobil and Statoil. In addition to its gasoline and convenience store businesses, Couche also offers marine fuel, aviation fuel, lubricants and chemicals. In addition, the company operates key fuel terminals and fuel depots in eight countries.
In 2012, Alimentation Couche-Tard purchased the Statoil retail arm of Norwegian oil giant Statoil ASA for U.S. $3.6 billion. The purchase included a broad retail network across Scandinavia, Poland, the Baltics and Russia with 2,292 stores. Couche expects to greatly expand convenience items at the Statoil stores which will likely add substantial sales and earnings during the next several years.
Sales soared 55% and EPS (earnings per share) increased 23% during the 12 months ended 4/28/13. Acquisitions, in addition to the Statoil purchase, pushed sales and earnings higher. I expect sales and EPS to increase 18 to 20% during the next 12-month period ending 4/29/14. Favorable results from the Statoil purchase could boost results much higher.
Considering the rapid growth and future potential of Alimentation Couche-Tard, ATD.B shares are a bargain at 17.0 times my forward EPS estimate of 3.65. The company’s balance sheet is very strong, and the dividend, which currently yields 0.5%, will likely be increased considerably during the next 12 months.
I will continue to follow Alimentation Couche-Tard, as well as many other high-quality companies in my Cabot Benjamin Graham Value Investor. For more information, click here.
|Alimentation Couche-Tard (ATC.B)
4204 Industriel Boulevard
Laval, QC H7L 0E3 Canada
|Index Membership: N/A
Industry: Grocery Stores
Full Time Employees: 78,500