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Better Know A Stock - Part 17

Recs

25

June 24, 2010 – Comments (3) | RELATED TICKERS: MINI

The inspiration here is all Stephen Colbert's.... he has his series of "Better know a district" so I figured why the heck not... Better Know a Stock, companies that are never followed or too small to be heard of. So here goes that 9000 part series.... =)

Mobile Mini, Inc. (NASD: MINI)

Mobile Mini, Inc. provides portable storage solutions in North America, the United Kingdom and the Netherlands. It offers a range of portable storage products in varying lengths and widths with various features, such as its patented locking systems, premium doors, and electrical wiring and shelving. 

Mobile Mini currently derives revenue from the following five sectors: consumer service & retail businesses, construction, industrial & commercial, government & institutions, and consumers. The first two segments comprise over 60% of MINI's revenues while individual consumers provide just over 6%. 

Mobile Mini has been a mark of consistency over the past decade. Usually I will not have the ability to dig back 10 years and find a company that has consistently benefitted shareholder value, but that's precisely what we have here in MINI. Taking a look back at the last decade, I have chosen to focus on their revenue, profit and shareholder equity growth.

2000: 90M in revenue, $1.11 in full-year EPS, 92M in shareholder equity
2001: 115M in revenue, $1.34 in full-year EPS, 162M in shareholder equity
2002: 133M in revenue, $1.38 in full-year EPS, 179M in shareholder equity
2003: 147M in revenue, $1.21 in full-year EPS, 189M in shareholder equity
2004: 168M in revenue, $1.40 in full-year EPS, 216M in shareholder equity
2005: 207M in revenue, $1.10 in full-year EPS, 268M in shareholder equity
2006: 273M in revenue, $1.21 in full-year EPS, 442M in shareholder equity
2007: 318M in revenue, $1.22 in full-year EPS, 458M in shareholder equity
2008: 415M in revenue, $0.75 in full-year EPS, 495M in shareholder equity
2009: 375M in revenue, $0.64 in full-year EPS, 548M in shareholder equity
2010: 338M (est) in revenue, $0.66 (est) in full-year EPS, 560M (my est.) in shareholder equity
2011: 371M (est) in revenue, $1.04 (est) in full-year EPS, 592M (my est.) in shareholder equity

Have profit forecasts disappointed over the past two years? Absolutely, but considering that a lot of their business is dependant on the construction sector and consumer retailers and they backed off considerably on their orders in that timespan it's not exactly a surprise. What continued to amaze me despite the 2008-2009 recession was just how resilient MINI was. They continued to produce a profit and grow shareholder value in the face of the worst construction downturn in well over 70 years. Historically speaking EBIDTA runs around 38% to 42% of revenue and has remained consistent. In addition, revenue derived from selling rental units rather than leasing them has increased dramatically over the past couple of years. This isn't to say that their leasing business is failing, in fact it's slated to grow in double digits over the next five years, but it's another way MINI has found to capitalize on their owned assets and increase shareholder value.

What I haven't mentioned thus far but what I am known for trying to delve deeper into is how cohesive of a management team each company has. From what I can tell much of MINI's consistency is derived directly from a long-standing team of upper management. Of the ten highest ranked company executives, five have been with the company over 11 years and four of the remaining five have over a decade of tenure in the business and joined Mobile Mini in 2008 with their Mobile Storage Group merger. Insider buying and selling is regularly done with the overall net effect being marginal in each direction. 

Considering the downside to Mobile Mini all one has to do is look at how heavily indebted the company must go to maintain its rental fleet. MINI must use nearly all of its operating profits to pay down existing debts which currently total just a shade over 800 million dollars. As stated above, the company is consistently profitable so making these payments has not up to this point been a problem, but any protracted and severe pullback in construction and consumer spending habits could spiral MINI into a black hole of debt restructuring. That is really one of the only flaws I can see with MINI. In about 10-15 years fleet overhauls are going to bite into the company's bottom line big time, but given that their current rental fleet is young, it's nothing that you should worry about all too much for now.

Mobile Mini looks well-positioned to continue to do what it has always done - make money for itself and its shareholders. MINI is currently trading marginally over its book value and around 15 times 2011's profit projections. It has a long-term growth rate closer to 12% which places this at a very reasonable price to earnings growth ratio of 1.20. I have long felt that MINI was either going to become a takeover candidate or it was going to become the big dog in its field. They are far too well run and way too profitable to continue to mull in the doldrums of just 1.05 times book value. I would be willing to place a target price on MINI of $26 per share which should easily support the underlying fundamentals.

Those numbers don't lie, and that ain't no bull!

UltraLong

3 Comments – Post Your Own

#1) On June 24, 2010 at 11:32 AM, jfotherg (37.96) wrote:

Ultralong,

Great post.

Sorry a bit off topic question but: 

Do you actually purchase all these stocks you picks for caps?

If so, how do you follow so many and keep track of when to sell etc.   Thanks in advance.  You have an  amazing track record.

 

Continued good luck to you,

 jfotherg 

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#2) On June 24, 2010 at 11:37 PM, GundersonGroup (28.52) wrote:

A few considerations...

MINI's interest coverage is at a 10 year low and has the majority of its debt coming due in 2013 which should already be well into a period of higher interest rates.

Nearly all of that shareholder "value" is goodwill from the Mobile Storage Group acquisition.

That period of "shareholder equity growth" you pointed out was from commercial construction activity well above the norm. If MINI's markets see normal or below normal construction activity for the next 5 years they are going to have to dilute existing shareholder equity with a secondary offering in order to bring their existing debt down to a manageable level.

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#3) On June 30, 2010 at 2:48 PM, TigerPack1 (97.23) wrote:

I am desperately searching for any reason to be more bullish about the market's prospects right now. Usually after a 15%-20% drop in stock pricing there are plenty of reasons to go bottom fishing...

I am sorry to report I cannot find any compelling reasons to be bullish or even nuetral about where the market is headed the next 3-6 months.  My portfolios are still structured at about 30%-40% net short in the real world, and that number has not really changed much for months.

We will re-evaluate on another 5%-10% drop in pricing!

-TigerPack

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