CULS opeartes 11 warehouse-style stores mainly on islands in the pacific and in the carribean. This is a microcap opportunity with, i believe, substantial upside. The stock is trading at less than book value ($4.48/share) is at approximately 7x run-rate earnings, has next to no debt and is generating free cash.
i am writing this quickly (and not as thoroughly as I would like) so as to post it quickly as I believe the opportunity is near-term.
A new management has cleaned up some of the mistakes of the prior team by closing a few underperforming stores (in New Zealand) and improving the cost structure. In addition, a typhoon has destroyed one of the company's 11 stores and that store has now been rebuilt and reopened.
now that the b/s has been addressed, CULS will begin opening new stores, though they have not indicated when that wil commence. i believe that each additional store adds approximately 15 cents a share as there will be little overhead required with additional stores.
CULS has had 7 consecutive quarters of positive comps and comps have accelerated throughout 2003.
In addition PSMT has just closed its store on the island of Guam, where CULS has 2 of its stores. this should lead to incremental revenues as PSMT customers migrate to CULS.
This model grosses up the 2003 revenues for the remodel which was only open for 4Q and assumes a 5% comp. (easy comparisons in the 1st half suggest this is easily achievable). I have assumed no new stores in 2004. As I mentioned, i believe each new store adds about $0.15/share. with flat comps in 2005 and one new store, 2005 eps will be approx. 75 cents.
beyond the eps, D &A is 1.6m/year and capex is just 0.6M, so there is an additional 26 cents of free cash beyond the eps.
again, this is a very cheap stock on all measures: P/S is less than 8% and FCF yield is approx 20%. Admittedly, this is not the greatest business on the planet, but its valuation coupled with the move toward growth should move the stock much higher over the next 3 months- one year.
concentration of business in just 11 stores.
tourism - related risk as this drives island economies
larger competitors move into CULS' markets (though they could do this through a buyout as well)
earnings report announced this morning
company moving to growth mode