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What do you do when you have a physics test tomorrow and you were out all night drinking thousands of beers? It’s real simple…sit next to the smart guy.
Have no idea what I am getting at? Remember the Eddie Murphy movie, “Coming to America”? John Amos played the manager of a restaurant called “McDowells”
Obviously, it was a blatant rip-off of McDonalds. The restaurant was run just like a McDonald’s and, as a result, it was pretty darn good.
Fast forward to the hyper marts of today. You have your Sam’s Clubs, your BJ’s and your Costco’s. There is no doubt that these franchises have been enormously successful in major world markets.
So say you want to open up a bunch of these stores in a place where the don’t exist…say in Central America and the Caribbean?
Today I bough PSMT (Pricesmart) at 34.82. I will sell it in 4 – 6 weeks at 40.14. Here’s why I like PSMT:
This stock is really starting to get people interested. It’s up 76% in the last 12 months with a trailing PE of only 21. The retail numbers coming out have been white hot and this is something that will most certainly permeate into some of the developing regions.
PriceSmart, Inc. owns and operates warehouse clubs in Central America and the Caribbean. Its warehouse clubs sell consumer goods and perishable foods at low prices to individuals and businesses, as well as offers ancillary services, which include food courts, tire centers, and photo centers. As of May 7, 2010, it operated 27 warehouse clubs in 11 countries and 1 U.S. territory, including 5 in Costa Rica; 4 each in Panama and Trinidad; 3 in Guatemala; 2 each in Dominican Republic, El Salvador, and Honduras; and 1 each in Aruba, Barbados, Jamaica, Nicaragua, and the United States Virgin Islands. The company was founded in 1994 and is headquartered in San Diego, California.
Now we come to the part that’s REALLY interesting. Father and son Sol and Robert Price own 47 percent of PriceSmart's stock. PriceSmart was Sol Price's third retail venture. His previous venture was the Price Club, which at one time was much bigger than all the other “clubs” combined. The warehouse club industry had become a $2 billion industry by 1985, the year Price Co. collected $1.8 billion in sales.
In 1993, when Sam’s Club eventually got bigger than Price Club, the Prices decided to merge with Costco. At the time, Price Co.'s revenues totaled $7.5 billion, about a billion dollars more than third place Costco, creating a $16 billion wholesale club that counted Robert Price as its chairman. The merger never really took hold and Robert Price left the organization in 1994, leaving with control over Price/Costco's commercial real estate operations and controlling interests in merchandising opportunities in certain international markets, including Australia, New Zealand, and Central America. These assets became part of a new company, aptly named Newco, but they eventually formed the foundation for another company, PriceSmart.
So what you are left with, in the Central American and Caribbean markets IS a company with the same business model as Costco. They had the recipe for success but the execution was bad in the early 2000’s. PriceSmart’s CEO was inexperienced and made bad decisions. With Jose Luis Laparte at the wheel, now all of that is turned around and they are the bull of the woods in Central America. Mr. Laparte worked more than 14 years for Wal-Mart Stores, Inc. in Mexico and the United States in progressively responsible positions. The stores here are favored by expats because they carry many items imported from the United States.
From an investment standpoint, PSMT is a small cap growth stock that uses the business model of a large cap growth stock. So there is a lot of room to run. Double digit growth rates are very feasible. Better than expected economic data from some of the large economies have helped alleviate concerns about the global economic outlook. It’s five year track record is irrefutable:
Sales, $
2006 735 MM
2007 889 MM
2008 1120 MM
2009 1252 MM
2010 1396 MM
Of course, the secret to earnings in retail boxes is grow the revenue, which is what PSMT has been doing. So the earnings growth has been great, as well:
Earnings
2006 $0.30
2007 $0.44
2008 $1.29
2009 $1.42
2010 $1.65
For the fourth quarter of fiscal year 2010, net warehouse sales were $357.0 million compared to $298.0 million in the fourth quarter of fiscal year 2009. Total revenue for the fourth quarter was $365.7 million compared to $305.1 million in the prior year. The Company had 27 warehouse clubs in operation as of the end of fiscal year 2010 compared to 26 warehouse clubs in operation at the end of fiscal year 2009.
Operating income in the fourth quarter of fiscal year 2010 was $20.1 million compared to operating income of $11.9 million in the fourth quarter of fiscal year 2009.
The Company recorded net income attributable to PriceSmart for the fourth quarter of $13.2 million or $0.44 per diluted share compared to net income attributable to PriceSmart of $10.3 million or $0.34 per diluted share in the fourth quarter of fiscal year 2009.
Net warehouse sales increased 11.6% to $1.4 billion during fiscal year 2010 compared to $1.2 billion in the prior year, and total revenue for fiscal year 2010 increased 11.5% to $1.4 billion from $1.3 billion in fiscal year 2009. For fiscal year 2010, the Company recorded operating income of $74.9 million and net income attributable to PriceSmart of $49.3 million, or $1.65 per diluted share. For fiscal year 2009, the Company recorded operating income of $57.5 million and net income attributable to PriceSmart of $42.3 million or $1.43 per diluted share.
You have to like the direction these guys are going in. They have the right plan and are executing. The ANAL-ysts, still don’t get it. They predict that for 2011, PSMT will have revenues of $1.6 Billion which will generate $1.91 per share. That’ s just silly. Pricesmart will have revenues of $1.8 Billion which will result in EPS of $2.17.
If you take the $2.17 of earnings and multiply by the PE of 21, that will take you to a share price of $45.57, which is well past my target sale price. Looks like the recipe for another winner for $$$MR. MARKET$$$.
You could take it from me, or better still, listen to what the man says:
PriceSmart's Chief Executive Officer and President Jose Luis Laparte said, "I am pleased to note that the Company experienced improved comparable sales growth trends through much of fiscal 2010, notwithstanding some weakness early in the year. During the fiscal year we successfully opened our fourth warehouse club in Trinidad and relocated one of our Panama City warehouse clubs to a new location. We also entered into an agreement to acquire land in Barranquilla, Colombia upon which we plan to construct our first warehouse club in that country. As we begin fiscal year 2011, our positive sales growth trend has continued during the first two months. Last week we successfully opened our third warehouse club in the Dominican Republic and we are hopeful that we can open our first Colombian warehouse club by the end of fiscal year 2011."
Sounds like those giant shopping carts with the 5 lb cans of baked beans are moving in Panama. Can you smell the aroma of success? Get ready for some real explosions!
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Let me know what you think of this write up.
Have no idea what I am getting at? Remember the Eddie Murphy movie, “Coming to America”? John Amos played the manager of a restaurant called “McDowells”
Obviously, it was a blatant rip-off of McDonalds. The restaurant was run just like a McDonald’s and, as a result, it was pretty darn good.
Fast forward to the hyper marts of today. You have your Sam’s Clubs, your BJ’s and your Costco’s. There is no doubt that these franchises have been enormously successful in major world markets.
So say you want to open up a bunch of these stores in a place where the don’t exist…say in Central America and the Caribbean?
Today I bough PSMT (Pricesmart) at 34.82. I will sell it in 4 – 6 weeks at 40.14. Here’s why I like PSMT:
This stock is really starting to get people interested. It’s up 76% in the last 12 months with a trailing PE of only 21. The retail numbers coming out have been white hot and this is something that will most certainly permeate into some of the developing regions.
PriceSmart, Inc. owns and operates warehouse clubs in Central America and the Caribbean. Its warehouse clubs sell consumer goods and perishable foods at low prices to individuals and businesses, as well as offers ancillary services, which include food courts, tire centers, and photo centers. As of May 7, 2010, it operated 27 warehouse clubs in 11 countries and 1 U.S. territory, including 5 in Costa Rica; 4 each in Panama and Trinidad; 3 in Guatemala; 2 each in Dominican Republic, El Salvador, and Honduras; and 1 each in Aruba, Barbados, Jamaica, Nicaragua, and the United States Virgin Islands. The company was founded in 1994 and is headquartered in San Diego, California.
Now we come to the part that’s REALLY interesting. Father and son Sol and Robert Price own 47 percent of PriceSmart's stock. PriceSmart was Sol Price's third retail venture. His previous venture was the Price Club, which at one time was much bigger than all the other “clubs” combined. The warehouse club industry had become a $2 billion industry by 1985, the year Price Co. collected $1.8 billion in sales.
In 1993, when Sam’s Club eventually got bigger than Price Club, the Prices decided to merge with Costco. At the time, Price Co.'s revenues totaled $7.5 billion, about a billion dollars more than third place Costco, creating a $16 billion wholesale club that counted Robert Price as its chairman. The merger never really took hold and Robert Price left the organization in 1994, leaving with control over Price/Costco's commercial real estate operations and controlling interests in merchandising opportunities in certain international markets, including Australia, New Zealand, and Central America. These assets became part of a new company, aptly named Newco, but they eventually formed the foundation for another company, PriceSmart.
So what you are left with, in the Central American and Caribbean markets IS a company with the same business model as Costco. They had the recipe for success but the execution was bad in the early 2000’s. PriceSmart’s CEO was inexperienced and made bad decisions. With Jose Luis Laparte at the wheel, now all of that is turned around and they are the bull of the woods in Central America. Mr. Laparte worked more than 14 years for Wal-Mart Stores, Inc. in Mexico and the United States in progressively responsible positions. The stores here are favored by expats because they carry many items imported from the United States.
From an investment standpoint, PSMT is a small cap growth stock that uses the business model of a large cap growth stock. So there is a lot of room to run. Double digit growth rates are very feasible. Better than expected economic data from some of the large economies have helped alleviate concerns about the global economic outlook. It’s five year track record is irrefutable:
Sales, $
2006 735 MM
2007 889 MM
2008 1120 MM
2009 1252 MM
2010 1396 MM
Of course, the secret to earnings in retail boxes is grow the revenue, which is what PSMT has been doing. So the earnings growth has been great, as well:
Earnings
2006 $0.30
2007 $0.44
2008 $1.29
2009 $1.42
2010 $1.65
For the fourth quarter of fiscal year 2010, net warehouse sales were $357.0 million compared to $298.0 million in the fourth quarter of fiscal year 2009. Total revenue for the fourth quarter was $365.7 million compared to $305.1 million in the prior year. The Company had 27 warehouse clubs in operation as of the end of fiscal year 2010 compared to 26 warehouse clubs in operation at the end of fiscal year 2009.
Operating income in the fourth quarter of fiscal year 2010 was $20.1 million compared to operating income of $11.9 million in the fourth quarter of fiscal year 2009.
The Company recorded net income attributable to PriceSmart for the fourth quarter of $13.2 million or $0.44 per diluted share compared to net income attributable to PriceSmart of $10.3 million or $0.34 per diluted share in the fourth quarter of fiscal year 2009.
Net warehouse sales increased 11.6% to $1.4 billion during fiscal year 2010 compared to $1.2 billion in the prior year, and total revenue for fiscal year 2010 increased 11.5% to $1.4 billion from $1.3 billion in fiscal year 2009. For fiscal year 2010, the Company recorded operating income of $74.9 million and net income attributable to PriceSmart of $49.3 million, or $1.65 per diluted share. For fiscal year 2009, the Company recorded operating income of $57.5 million and net income attributable to PriceSmart of $42.3 million or $1.43 per diluted share.
You have to like the direction these guys are going in. They have the right plan and are executing. The ANAL-ysts, still don’t get it. They predict that for 2011, PSMT will have revenues of $1.6 Billion which will generate $1.91 per share. That’ s just silly. Pricesmart will have revenues of $1.8 Billion which will result in EPS of $2.17.
If you take the $2.17 of earnings and multiply by the PE of 21, that will take you to a share price of $45.57, which is well past my target sale price. Looks like the recipe for another winner for $$$MR. MARKET$$$.
You could take it from me, or better still, listen to what the man says:
PriceSmart's Chief Executive Officer and President Jose Luis Laparte said, "I am pleased to note that the Company experienced improved comparable sales growth trends through much of fiscal 2010, notwithstanding some weakness early in the year. During the fiscal year we successfully opened our fourth warehouse club in Trinidad and relocated one of our Panama City warehouse clubs to a new location. We also entered into an agreement to acquire land in Barranquilla, Colombia upon which we plan to construct our first warehouse club in that country. As we begin fiscal year 2011, our positive sales growth trend has continued during the first two months. Last week we successfully opened our third warehouse club in the Dominican Republic and we are hopeful that we can open our first Colombian warehouse club by the end of fiscal year 2011."
Sounds like those giant shopping carts with the 5 lb cans of baked beans are moving in Panama. Can you smell the aroma of success? Get ready for some real explosions!
I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Let me know what you think of this write up.
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