Google Finance
SEDAR Filing
July 17, 2013
2012 Data
Check list:
1.Major Business.
Cell phone and service retailer. Open stores in mall or club stores.
Canada: (Sell both Bell and Rogers)
Wireless Wave: 140 stores
T-Booth: 107 stores
Wireless etc: 84 stores, inside Costco.
US: (sell Verizon only)
Diamond Wireless: 204 stores
Wireless Zone: 419 stores
Australia:
All Phones: 199 stores
2.Balance sheet.
Recent Price:$17.0, Tangible book value: 0 shares: 22.3m Market Caps: $370m. Current asset:$222m, Current liability: $231m, Debt: $162m, Inventory:$62m, Cash:$46m.
3.Credit facility.
Term loan $108m+$20m mature at Oct. 2017. Prime+0.75% to 1.75%. Quarterly principle payment around $5.5m.
$15m line of credit. $8m outstanding.
$6.5m line of credit from Australia acquisition. $4.5m outstanding.
4.Financial data by years.
| Q4-13 | Q3-13 | Q2-13 | Q1-13 | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 401 | 339 | 321 | 305 | 785 | 584 | 412 | |||||||
| Income | 8.3 | (12.3) | 5.6 | 3.3 | 27.5 | 28.7 | 22.5 | |||||||
| EBITDA | 17.8 | 12.7 | 11.9 | 14 | 49.6 | 53.3 | 44 | |||||||
| Depreciation | 7.7 | 6.4 | 6.1 | 6.4 | 12.7 | 10 | 8.6 | |||||||
| CAPX | 4.2 | 3.2 | 2.9 | 2.1 | 12.6 | 9.1 | 9.4 | |||||||
| Interest Expense | 1.7 | 2.2 | 1.8 | 1.7 | 1.9 | 1.2 | 0.4 | |||||||
| Real Earning | 8.3 | 5.1 | 5.0 | 7.1 | 24.6 | 30.1 | 23.9 | |||||||
| Cash | 37.9 | 41.9 | 45.3 | 46.2 | 55.2 | 30.1 | 24.3 | |||||||
| Debt | 135 | 139 | 151.1 | 161.6 | 149.7 | 29.6 | 36.1 |
EBIT Magin data
| Q3-13 | Q2-13 | Q1-13(1) | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Canada | 10% | 7% | 9% | 11% | 13% | 14.3% | 14.2% | 13.1% | 13.4% | 9.8% | 11.6% | 15% | 17.2% |
| DW(US) | 4% | 8% | 4.2% | 6.1% | 8% | 8.9%(2) | |||||||
| WZ(US) | 4% | 4,2% | 4.9% | 4%(3) | |||||||||
| Australia | (5%) | 0% | 1.8% | 2.4%(4) |
(2) Only last quarter of the year. Generally it is higher than full year.
(3) Only last one month of the year.
(4) Only last two month of the year.
When it acquires T-Booth at 2005, its margin was done quite a lot. But it is able to get it back. However, it is very clear that the margin is going down along the years.
Q1 2013, Wireless Zone seems doing quite well with margin increased. While Australia seems still not profitable. Need more time to see whether it can improve profitability after acquisition.
(Aug. 08, 2013)
Q2 2013: Canada has some extra cost on set new booths for Target store, so margin is down. US both doing OK. While Australia is still under water.
5.Insider holding, options, Insider trading info, share buy back.
THOMAS E. SKIDMORE: CEO, Co-Founder, 4.67m, 21%
ALLAN SKIDMORE: Co-Founder, 3.68m, 16.5%
Insiders own 41% of total shares.
6.Management compensation.
Top5: 2012: $5m 2011: $4.5m , 2010: $3.1m
7.Employee numbers. Revenue/Employee. Compensation/Employee.
3800 at Dec 2012
8.Industry comparison.
Major competitors in the same industry. Whether the business is competitive?
9.Auditor
DELOITTE LLP
10.Major events.
1997: Created WirelessWave stores.
June. 28 2005: Acquired CabTel (T-Booth), Created Wireless etc... for Costco.
Oct. 1, 2010: 81.5% of Diamond wireless in US for $51m.
Nov. 11, 2012 : 83% of AMT (All phones) in Australia, $66m. Later increased to 88%
Dec. 1, 2012: ATI Inc (Wireless Zone), in US, $84m. It operates in 28 states mainly on east US which compliments Diamond wireless operation area.
11.Comments.
(1) Currently the two new acquisitions are fully incorporated. It almost doubled the store numbers the company owns. This gives good boost of the revenue. However, as margin goes down, the profit won't up proportionately.
(2) It operates in a very competitive environment and seems no barrier to entry. Moreover, Bell, Rogers seems also like to operate their own retail chains. However, its well training system does offer some advantages that others don't have, thus why it is much successful than other similar stores like the sources, Bestbuy, etc. in wireless product. It is why it was chosen by Target Canada to operate similar booth store as in Costco. With currently only 3% net profit margin, others might think twice before jump in. While for GLN, it is still doable.
(3) The current debt is a little bit high and a little bit concerned. Need to see how it is cash flow goes in the following two quarters. Generally I think it will and be able to pay down the debt.
(4)The business is expended quite well, however, profit won't go up that much. I give it a Quality Score of 8.
(5) It is hard to calculate the base price. This year it should be marginally higher than last year. Revenue should be $1.3B to $1.5B. However, I can't estimate profit numbers. Just assume the new income from acquisition would cover the extra interest cost which is around $6m/year. I use FCF-WC for last 3 years which comes $27.4m/year. Comes a base price of $18.4 on a conservative basis. Currently price seems still a little high. $15 would be more attractive.
(6) The major concern for this company is whether it can improve its profit margin of the new acquisitions and being profitable from them. Also the company is significantly bigger than most of the companies I studied, a little bit hard for me.
(7) Other analysis links:
http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/80586
Update Dec. 13, 2013
Current price $12.50
(1)US store seems OK. The Australia acquisition went bad. However, I think it won't kill it. The main risk with the business is the high debt/equity. After some reading, I have some confidence that it could generate enough cash to cover the repayment. Also given the high insider ownership, I feel comfortable to increase position a little bit.
Update Apr. 24, 2014
Current price $11.80
(1) Canadian division usually is its most profitable division. In second half of 2013 it has been affected quite a lot by the telecom company switch from 3 year contract to 2 year contract. Don't know whether it will be permanent. However, starting from Q3 2015, it might get some extra lift because at that time both some of the 3 years contract and 2 years contract customers will need to renew at the same time.
(2) The U. S division actually did quite well which offset the decline in Canada. Australia still not good. Better just close them all. The acquisition turned out is pretty bad mainly because two telecom companies end their relationship with the chain after GLN acquired it.
(3) The main concern is still the $135m debt. It lowered the debt repayment from $25m/year to around $15m/year early this year. If its business can remain current level of cash generation of $40m before CapX and dividend, then it can just fulfill the cash it needs ( CapX $12m+ Dividend $13m + Debt repayment $15m). In case there is not enough cash, I believe the company have several options to fulfill the debt obligation. First it still has $38m in cash. Also it can sell its business division. Or stop paying dividend( of course it would be bad). Overall I am comfortable that the company won't go bankrupt in near future.
Update May. 12, 2014
Q1 2014 Data
Current price $11.14
(1) Debt now is $130.5m. cash now is $39m.
(2) CF-WC is about $8.4m. However, the use of cash is less as well. CapX-Sale of equipment is $1m. Dividend $3.5m, Pay down debt $4.5m. Given the working capital change, cash increased by $1m.
(3)Canada division seems turning better despite the bad weather in Q1. Australia division will lost contract to manage Virgin stores. Will have a goodwill impairment at Q2.
(4)It is troublesome with Australia business. It might just better shutdown all of them. Overall it seems OK with current situation. However, I do feel should have been more patient instead of bought too much at higher price.
Q1 2014 Data
Current price $11.14
(1) Debt now is $130.5m. cash now is $39m.
(2) CF-WC is about $8.4m. However, the use of cash is less as well. CapX-Sale of equipment is $1m. Dividend $3.5m, Pay down debt $4.5m. Given the working capital change, cash increased by $1m.
(3)Canada division seems turning better despite the bad weather in Q1. Australia division will lost contract to manage Virgin stores. Will have a goodwill impairment at Q2.
(4)It is troublesome with Australia business. It might just better shutdown all of them. Overall it seems OK with current situation. However, I do feel should have been more patient instead of bought too much at higher price.
Update Nov. 06, 2014
Q3 2014 Data
Current price $10.90 which increased from $10 after good Q3 result.
(1) Debt now is $122m. cash now is $62m.
(2) For the first 3Q of 2014. CF-WC is about $31m. Cap-X $8m. Sale of equipment is $3.7m. Dividend is around $10m. Pay down debt around $12m.
(3) Canada division did very well this quarter. US is good too. Australia is still bad.
(4) Overall the company is doing very well this quarter with much lower risk of debt default. The share price is cheap.
Q3 2014 Data
Current price $10.90 which increased from $10 after good Q3 result.
(1) Debt now is $122m. cash now is $62m.
(2) For the first 3Q of 2014. CF-WC is about $31m. Cap-X $8m. Sale of equipment is $3.7m. Dividend is around $10m. Pay down debt around $12m.
(3) Canada division did very well this quarter. US is good too. Australia is still bad.
(4) Overall the company is doing very well this quarter with much lower risk of debt default. The share price is cheap.
