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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GLNIF.PK over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Glentel (GLNIF.PK) is a retailer of cellphones and wireless voice and data plans in Canada, US, and Australia. In Canada and Australia, it operates multi-carrier stores, while in the US it partners with Verizon Wireless (VZ). The company is growing rapidly, more than doubling its store count in 2012.
Source: Glentel 2012 Annual Report
Much of the recent growth has been via acquisition of franchise operators. Glentel bought Wireless Zone in the US and Allphones in Australia, both of which have company owned stores and franchised stores. This allows Glentel to leverage the capital investment of their franchisees along with its own high quality operating systems.
Valuation
Earnings in the most recent twelve months were $1.24 per share, up slightly compared to the year before. At its recent price that is a 13.8 P/E multiple. This multiple is reasonable for a growing, profitable business. Glentel's earnings per share have grown approximately 19% per year from $0.73 in 2009. This gives the company a PEG of 0.73, which is extremely favourable. Earnings growth should continue or accelerate due to synergies and revenue growth from acquisitions. The acquisitions closed in Q4 2012, and Glentel is currently working on those operations by closing underperforming locations and improving management.
Risks
The major risks to this business are related to the wireless carriers. Their stores in Canada and Australia sell multiple carriers, so are less subject to the whims of any one carrier. Both countries have three major carriers, and the company excludes one, allowing it to charge the other two carriers more for the privilege of accessing their distribution. This increases their bargaining power with the carriers, as they know they'd have to give up the activations from Glentel to cut Glentel's take. Glentelrecently renewed their contract with Bell in Canada. Because they only sell Bell and Rogers from the big three in Canada, when negotiating to renew they can tell Bell that if they do not agree to Glentel's terms they will give their spot to Telus. This allows them to keep their margins.
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