|Shares Out. (in M):||86||P/E||16.2x||13.5x|
|Market Cap (in $M):||4,182||P/FCF||15.5x||12.5x|
|Net Debt (in $M):||281||EBIT||0||0|
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Yes, it's a consolidator. No, I don't normally like to own many businesses where nearly 50% of total assets are goodwill & intangibles. But these guys are executing really well in a really good business with a really long runway. This is a multi-year 'open-ended' growth story with some pricing power where the street is not aggressive enough due to limited but improving disclosure around the drivers of the business. Happy to address industry structure in the Q&A but wanted to cover the high points concisely below.
0. What is the value proposition for a closed-loop credit card or fleet card?
A: Fleet operators save on fuel costs and can control/manage costs effectively. For example, a local landscaping company with 15 vehicles wants to ensure that employees are following set rules - for example, not using the company card to fill up their family's SUV, not driving 50 miles out of the usual service area, etc. The owner also understands that his employees can't float that kind of money; moreover, he doesn't want to waste resources doing T&E reports. In lieu of giving everybody an Amex and dealing with errors/abuse after the fact, the fleet card is an excellent solution that solves these problems in a cost effective manner.
Fuel merchants want to accept the card because they are given an advantage over the competing gas station across the street. The fuel card network draws traffic to their site and brings drivers into the c-store for other high margin purchases like food and cigarettes. For example, that landscaper may stop to fuel up the morning but also buy a few bags of ice, donuts and coffee for his crew and lunch for the afternoon. Customers on fuel cards spend more than the average customer who fills his gas tank. FLT’s installed base on average use just two different gas stations, so it really improves the value of the network for merchants who want that higher margin recurring business. It creates a very regular, Pavlovian response when a guy or gal needs to fill up the tank.
1. High barriers to entry in oligopoly give incumbents a long growth runway
2. Growth opportunities in high quality, recurring fee business
3. Proven value creation through M&A outside the US where FLT is the clear leader
4. CEO owns a lot of stock and has a deep bench of talent.
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