Thursday, September 24, 2009

Nice pickup at Monro Muffler (MNRO)

AlphaNinjna - Monro Muffler(MNRO) shares have done well as of late, up 20% this year. Maybe that's why they're not up more on this morning's news.

The company announced this morning that earnings would come in near the high-end of previous estimates. More imporantly, they announced a couple of nicely accretive acquisitions (well at least one is accretive):

The total purchase price for Tire Warehouse, which consists of 40 tire stores and six tire franchise locations, is $34 million. The purchase price includes real estate assets for 12 store locations and a distribution center located in Swanzy, New Hampshire. Tire Warehouse, which focuses solely on tires and related services, generated annual net sales of approximately $53 million in 2008. Management expects the Tire Warehouse business to be slightly accretive in the first twelve months following the acquisition and $0.06 to $0.08 accretive in the second twelve months of Monro ownership. The transaction is expected to close in early October. Following the acquisition and initial integration of the business, the Company intends to further leverage the Tire Warehouse store presence and distribution facilities by converting 50 of its existing Monro service stores in these markets to its Black Gold format. Black Gold is a program designed to increase sales in Monro's service stores, particularly of tires and related services.

The total purchase price of the Midwest Tire business was $2 million. Midwest Tire consists of four tire locations in northwest Indiana that generated annual net sales of approximately $6 million in 2008. Management expects that Midwest Tire, which will be converted to the Mr. Tire brand name, will operate at a breakeven level in the first twelve months following the acquisition.

Monro paid .65 and .33 times sales for these businesses, far below its own valuation of 1.24times sales -->> NICE WORK! While I love those details, I calculate net income and free cash flow for next year of $36million, a 6% FCFY (Free Cash Flow Yield) -->> too low of a yield for me to chase.

No comments:

Post a Comment