Food-to-go forecourt operator pumps up US presence

Irish food and petrol forecourt operator Applegreen (APGN:AIM) has pumped up its growth potential with a major US acquisition.

The $75.5m purchase (6 Jul) of forecourt retailer Brandi, in partnership with a US institutional real estate investor, provides the Dublin-headquartered concern with a platform for growth along America’s East Coast.

We admire Applegreen’s cash generative business model and exposure to food-to-go and convenience trends. It is paying $5.4m towards the earnings enhancing acquisition of Brandi, which has 42 sites in or close to Columbia, South Carolina’s state capital.

Most of Brandi’s sites are petrol filling stations including Burger King restaurants and Subway and Blimpie outlets, though Brandi also operates eight standalone Burger King sites.

Already a major player in the Republic of Ireland and operating 74 petrol filling stations in the UK, Applegreen now has a strong position from which to accelerate US growth. It already has six self-owned sites on Long Island and seven stores in New England operating under a tie-up with Cross America Partners.

For 2017 and 2018, Shore Capital currently forecasts pre-tax profit of €22.1m (£19.6m) and earnings of 22.9 cent (20.3p), rising to €26.2m and 27.1 cent respectively. However, there is significant scope for upgrades thanks to the Brandi deal and Applegreen’s impending €15.7m acquisition of a 50% share in the Joint Fuels Terminal (JFT) in Dublin port from Topaz Energy.

Applegreen’s prospective price/earnings (PE) ratio of 22.7 is demanding but justified by its strong cash generation and US growth opportunity. Keep buying at 460p.


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