http://www.autocan.ca/investors.htm
Google Finance
Filing
Aug, 17, 2015
2015 Q2 Data
1.Basic Information
(1) History
Patrick(Pat) Priestner found the company at 1993 and grows to 5 dealership at 2001. It grew to 14 dealership and IPO at 2006 on TSE as an income fund. Then converted to a corporation at 2009. Now It grow to around 50 dealerships with annual sales around 40k vehicles.
(2) Business related:
Auto dealership's business is quite simple relatively. Their revenue source: new vehicle sales, used vehicle sales, service and parts. A typical dealership might sale 1000 to 2000 vehicles per year. Likely 2/3 in new vehicles and 1/3 in used vehicles. For each vehicle,
Seasonality: New vehicle sales high to low Q3(30%), Q2, Q4, Q1(20%). Used vehicle Q2(27%), Q3, Q1 then Q4(21%) and less seasonal.
Floor plan loan: a common practice for financing vehicle inventory. Usually it is just a little lower than the inventory balance and the rate is quite good. Currently the company has around $620m in inventory and $607m in floor plan loan.
On an average, a dealership may make $1m to $1.5m in annual net income. To buy a dealership might cost $15m to $25m or 5-6 times of EBIDTA.
ACG (Auto Canada Group?): A private company controlled by Pat and hold around 10% of the ACQ's share. The company is mainly for the requirement of GM for 15% of the interest of dealership must be hold by Pat( need clarify? ).
(3) Management.
Pat is the key person in the company. He started as a college drop off in auto dealer industry and doing incredibly good in selling autos. Then started his own dealership and growing to more dealers. His brother did the same thing but still remain private with over 30 dealership under his name I guess. Currently Pat is the executive chairman of the company. I guess his main focus is on acquiring new dealerships.
1) Floorplan loan: around $600m with interest rate < 3%.
2) Term loan: $150m, 5.625% due May 2021
3) Revolver: $200m revolver, $130m outstanding at end of Q3 2015. Prime+0.75%--2%, current around 4.5%.
(5) Insider holding, options, Insider trading info, share buy back.
Pat hold around 9% of the common shares.
Tom Orysiuk(CEO) hold around 2% of common shares.
(6) Employee numbersTom Orysiuk(CEO) hold around 2% of common shares.
Currently around 3500 employees. By average, around 70 to 80 employee/dealership.
(7) Auditor
PricewaterhouseCoopers
(8) Industry comparison.
In Canada, ACQ is the only public dealership company. In US, there are several companies.
Dilawri Group of Companies: Canada largest private dealership group, 53 dealerships. 2200 employees. Store seems smaller than ACQ with lower employee numbers/store.
(9) Major events
1) At 2014 acquired 17 dealership by issuing around $200 in stock and over $100 increase in debt.
2. Financial data.1) At 2014 acquired 17 dealership by issuing around $200 in stock and over $100 increase in debt.
(1)At 2008, the company write down intangible of $125m.
(2)At 2011, the company reversed some of the write down in 2008($21m I guess).
3. Risk
(1) The company's revenue is heavily rely on western Canada province which is currently under depression. The situation for sure will be worse. The company's revenue and income for sure will be lower in the near future. Also the whole Canadian economy might in depression soon plus real estate bubble may pop. That would also has a major negative effect on this company.
(2) Pat has quite a lot interest outside the company and keep reducing his share. However, part of the reason for his reducing share is to fund purchase of new GM dealership in ACG.
4. Valuation
Current price is around $27. Share outstanding 24.5m. Market cap $660m. Current net debt is around $220m. Tangible book value is around 0.
At end of 2014, total paid in capital is $440m. From 2007 to 2014, the company's real earning is around $160m. Returned $100m through dividend. The rest $60m is used to fund the acquisition. Total invested capital + retained earning is around $500m. When add $380 intangible and the $100m write down/reverse in 2008/2011. Real balance of intangibles is $480m. Given current tangible book value is zero, this means all the invested capital is just converted to intangibles.
2014 EBITDA is just about $100m. The company was trading much higher in 2014 as high as $90. Currently its trading around 9-10 times EV/EBIDTA which is pretty a fair price if there is no grows. On a P/E basis, it is trading around 16 P/E which is pretty fair.
However, If you using acquisition cost/vehicle cost as a matrix, previous to 2013, the cost to acquire per one vehicle annual sale is below $5000. 2013 to 2014 the cost is over $7000 per vehicle. Which indicate $466 net income/vehicle using 15 P/E. Using 52000+12000=64000 as normal annual sales, using $7000 per vehicle, the price for the total company is just $450m. Which indicate only a $18.50 share price.
From profit/vehicle side, by average is $580/vehicle while lately is over $1000. If using $800/vehicle using 15P/E, then the fair value per vehicle sale could be $12000. Then fair value would be $770m for the company. The good price would be $460m. That would be $19/share.
The company is a grows investment with pretty strong management. The price is probably is still a little high. Given currently bad economy, in near term, more down side pressure.
5.Links
https://oraclefromomaha.wordpress.com/2015/02/09/autocanada-its-time-to-back-up-the-truck-literally/
Nov. 30. 2015
Lately it enter a private placement with CIBC at $25.50/share for $75m. CIBC has an option to buy another $11m at the same price. Share price dropped from over $30 to around $25.5. The company want to use the proceeds to reduce the revolver debt.
https://oraclefromomaha.wordpress.com/2015/02/09/autocanada-its-time-to-back-up-the-truck-literally/
Nov. 30. 2015
Lately it enter a private placement with CIBC at $25.50/share for $75m. CIBC has an option to buy another $11m at the same price. Share price dropped from over $30 to around $25.5. The company want to use the proceeds to reduce the revolver debt.
