Post by
Tobuyornot on Dec 03, 2012 4:18pm
Ccord sings in praise
GLENTEL Inc. (GLN : TSX : C$18.65) - Buy - Target:C$24.00
Scoops up another accretive acquisition; reiterating BUY rating and increasing target price to C$24.00 (from C$19.00)
Investment recommendation We are increasing our target price to C$24.00 (from C$19.00) and reiterating our BUY rating following the acquisition of Wireless Zone. Investment highlights GLENTEL announced the acquisition of Wireless Zone, a 428-store franchise Verizon dealer in the U.S. for $83.3 million. The transaction will be funded through cash on hand and existing bank debt. The $83.3 million purchase price represents 5.4x Wireless Zone's TTM EBITDA of $15.3 million, attractive compared to GLENTEL's valuation of 6.8x EBITDA prior to the announcement on Wednesday night. In our view, Wireless Zone represents a complementary acquisition to the company's current Diamond Wireless business, with relatively little overlap. While both Diamond Wireless and Wireless Zone are two of six National Premium Retailers for Verizon, 64% of Wireless Zone's 428 stores are located in the Northeastern U.S., where Diamond Wireless' presence is relatively minimal. The transaction increases our 2013 EPS
estimate by ~22%. Valuation Our target represents 12.4x our 2013 EPS estimate of $1.93. GLENTEL's recent string of agreements and acquisitions has provided the company with a robust earnings growth profile, and the Wireless Zone acquisition represents another accretive growth step. We believe GLENTEL remains an attractive option for investors looking to capitalize on increasing smartphone penetration at a reasonable valuation.