September 6, 2007, 7:00 am

Stock in the Scope: Alimentation Couche-Tard (ATD.B)

by: The Financial Blogger    Category: Trading
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This is definitely one of the best Québec’s success stories we have. Alimentation Couche-Tard was created by Alain Bouchard in 1980 with only one convenience store. At the end of their last quarter, they were showing a total of 5,615

couchetardlogo.jpg

 

stores across Canada and USA. Couche-Tard (along with his banner Circle K in the States) is now one of the biggest convenience store chains in North America (Currently ranked 3rd). The stock lost more than 25% from its 52 weeks high ($28.42 in November 2006). It is now around $21 and something after showing strong result for their first year quarter. I think this is a good stock to buy in line with a “buy and hold strategy”.

A moment of perturbation

While profit margins on gasoline sales were shrinking as something else under cold water, Couche-Tard lost two VP’s in a span of a month. Mick Parker, who was responsible for the Florida and Gulf of Mexico region, left for a competitor while North-Est America VP, Stephane Gonthier was leaving as well. Mr. Gonthier was presumed to be a logic successor to Alain Bouchard, President.

Add all these news to the fact that Couche-Tard was financially slowing down compared to the previous years and you have a free-falling stock. Money on gasoline is not as good as it is used to be and the loss of key employees in the management team scared some investors. I guess a company is just not the same when it looses a part of its heart.

Proven Growth

Alimentation Couche-Tard always shown a strong growth in the past. In fact, investors was so used to amazing growth quarters after quarters over several years that the company was penalized for its previous year results. However, the first quarter of their financial year show much better results. Revenues (3,6G$) were up by 26,8% while net profits (69,1M$) were jumping by 54,9%. These results show the true character of the company who did not stop his growth for the past 25 years.

Cash in the bank

Couche-Tard is still looking to make another purchase. In fact, they have 171M$ in cash, ready to buy any stores. They forecast the purchase of about 200 to 300 existing convenience stores along with the opening of 60 new ones. They also declared a small dividend ($0,03 per share).

Couche-Tard recently launchent its share repurchase program. The company plans on purchase up to 2,808,765 of Class A multiple voting shares and 7,332,066 of Class B subordinate voting shares. Couche-Tard will most likely buy its shares back on the market (TSX) from August 8, 2007 to August 7, 2008. This method along with good results should push the stock price up during the next year.

A good defensive stock

Couche-Tard evolves in a pretty defensive industry. People will likely go to convenience store regardless of the economic situation. Therefore, even if the overall market is slowing down, Couche-Tard should be able to keep showing good results.

The directors team proved again that they can create value within the company. They do not seem to be worried by Wal-Mart’s strategy to implement small supermarkets in the USA. In fact, they believe that Wal-Mart will not hit their segment but the one of the smaller supermarkets.

I must admit that I have previously purchased ATD.B during this year. I will keep my stocks for a while as I strongly think that there is a lot of potential within this organisation.

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Comments

Bill Carrigan gave this stock a BUY today.

by: The Financial Blogger | September 6th, 2007 (1:18 pm)

In fact, my real name is… Bill Carrigan! 😈

I made a great profit with this stock and sold it when it was at $26 back in February. Since then, the stock is only falling. Maybe it is the right time to buy it again.