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PCAI: Acquisitions Could Gas Up Profits
Thursday , November 30, 2006 16:29ET
The South Florida gasoline and convenience store market is beginning to experience some consolidation. One company that is gaining momentum in this emerging trend is Petroleum Consolidators of America, Inc (PCAI).
Petroleum Consolidators of America, Inc. announced on Wednesday that it had entered into its second letter of intent with an independent owner to acquire a Chevron branded gas station located in Charlotte County, Florida.
Knobias originally reported on the company on November 9th, highlighting its first acquisition; a BP branded gas station also located in Charlotte County, Florida.
Knobias spoke with David Cohen, President and CEO of Petroleum Consolidators of American, Inc about the company's second deal.
"The second store is actually on the same road but 8 miles north,” noted Cohen, "It is also being acquired from the same owner but is a different brand than the first one."
The stations being different brands should allow Petroleum Consolidators a positive hedging effect in the event one brand becomes more or less desirable, as most recently experienced with CITGO. With several different brands, Petroleum Consolidators has the added ability to capture different consumer groups based on product offerings and pricing. Furthermore, these stations should immediately experience cost efficiencies through the implementation of technology and other cost saving mechanisms.
"We will purchase the gasoline in two different ways," said Cohen, "We will either use a major oil company as a supplier, such as Exxon-Mobil, BP, etc. or we will use 'jobbers' that have supply agreements and act as middlemen."
The two acquisitions are different in size and are expected to contribute different revenue and gross income numbers.
"The first acquisition is projecting revenue of $4.5M and a bottom line of $275,000. The second acquisition should produce $3M in revenue and contribute $195,000 in net income," noted Cohen, "The majority of revenue is generated from gas sales while the majority of the bottom line is contributed from inside store sales."
As its name implies, Petroleum Consolidators business strategy is to roll up these stations south of Orlando and house them under one name. The company has an aggressive business plan involving a number of acquisitions.
"We are targeting 50-60 stations over the next three years," stated Cohen, "But that number may decrease if we purchase ‘Megastations’.
A ‘Megastation’ is described as having a large structure on the property and bringing in $10M-$15M in annual revenue.
"If we decide to focus on ‘Megastations,’ we will probably not grow to 50-60 locations as we will achieve the same revenue and earning targets with fewer facilities," finished Cohen, "If we do not pursue ‘Megastations,’ our goal is to announce an acquisition that fits our profile every 6-8 weeks while maintaining our goals of contributing to the top and bottom line."
In any event, with $7.5M in revenue expected with half a million in gross income from the two stores, the company is quickly growing its top and bottom line numbers through an aggressive acquisition strategy. With expected cost synergies originating from the close proximities of the stores, investors can easily see the benefit of having these varied branded stations under one umbrella. Investors should continue to watch for more acquisition news from this name.
AI
