LIQUOR STORES NA LTD 4.70 PCT DEBS T.LIQ.DB.B

RE:Joe Canal

[Goldbuggy1]

ILUVDIVIDENDS wrote: I have been to their location in N.J. and it is well-located along a high-traffic, densely populated corridor. It has a great format/layout and obviously is focussed on not only volume sales but quality too. I think that they have made a great investment by focussing in this area.

I do agree that this was a great investment. For a company who wanted to diversify out of the oil sensitive areas they couldn't have made a better pick in such a timely fashion. In a state that only allows 2 liquor licenses, which makes them hard to get, in only 2 short months since their announcement they now own 51% of a store where share of the their Sales will be about $25M USD. They can also purchase the other 49% on the same terms increasing their share to $50M USD. The only thing that is questionable to me is if the company paid too much for this company. On sales of $25M the $15M Purchase Price seems rather high to me. I know this is a good investment now and especially into the future but they still need to make a decent profit from this also. If their Gross Margin is close to Canada and on their first year in the low end at 25% then their Adjusted Operating Margin would be about $1.5M or about 6% of sales. Net earning for the company usually runs around 2% of sales but Adjusted Operating Margin is more important. So it all sort of depends on what this company has to pay in interest for it's Credit Line. I can't seem to find that written anywhere. But if it was as low as 6% and on $15M borrowed, they would have to pay $0.9M on Interest. So from $1.5M they still have a profit of $0.6M Dollars. If the Interest Payment is higher than it naturally digs into profit. The Market didn't seem to like this news about the purchase very much, so I don't know if they overpaid or not. What I do know for sure is I am cheering for the New Jersey Devils to make it to at least the semi playoffs in the NHL this year, against Vancouver Canucks, and the winner of that series plays either Calgary or Edmonton in the Playoffs.