I initiated a position in ATD.B on Friday. I revisited this name shortly after my last Wednesday’s posting “Where is the Value?”. I’ve provided a brief description of ATD.B as well as my reasons for buying:
“Couche-Tard is the largest convenience store operator in Canada with a network of over 2,000 stores in Canada as well as a considerable presence in the U.S., with more than 3,000 additional stores. Over 3,600 of the total number are Company-operated stores and nearly 1,400 stores are operated under our affiliate program. The Company sells fuel in 65% of its Company-operated stores. The Canadian stores are located in Quebec, Ontario, Alberta, British Columbia, Manitoba, Saskatchewan and the Northwest Territories. The U.S. stores are located in 28 states. The stores are primarily operated under the Couche-Tard® and Mac’s® trademarks in Canada and the Circle K® trademark in the U.S."
"In addition to the North American Couche-Tard network, there are approximately 3,500 Circle K licensed stores located in seven other regions worldwide (Japan, Hong Kong, China, Indonesia, Guam, Macao and Mexico).”
-Trailing P/E 20
-2008 estimated P/E 16
-2009 estimated P/E 14.5
-Recession proof industry
-Recognizable and strong brand (I personally like the layout of the Mac stores)
-Stock has been under pressure recently due to declining US fuel margins (at the pump) as well as the integration of the 236 convenience stores purchased from Shell in Dec 2006.
-In my opinion the last couple of quarters were decent despite the unfavourable fuel margins. I believe that when margins turn around these guys will surprise the street.
-TDWaterhouse has a 12 month target price of $28 (up about 30% from current levels)
-Successful history of growing by acquisition (in both Canada and the US)