Cash Converters International Ltd (ASX: CCV) has today announced the acquisition of six franchised stores in Victoria for $10.8 million, including assets of $3.5 million.
Cash Converters is a leading second-hand goods dealer and payday loans provider, and franchises and operates stores throughout Australia and internationally.
Today's acquisition was made from an existing franchisee and will be paid out of cash and existing debt facilities, at an EBIT multiple of 3.7 times.
The transaction is dependent upon the renewal of store leases and will occur on 26 February 2014. It takes the total number of corporate owned stores in Australia to 70, with 59 in the UK.
It said in the announcement that it, "is continuing to review opportunities to acquire further stores and increase the distribution network for its financial services products." According to the company's website, the Cash Converters mast head can be found on over 700 stores throughout the world.
Cash Converters derives around 55% of its EBITDA from personal loans and 14% from Financial Services – Admin before corporate costs. This compares to just 31% from franchise and store operations.
Should you Buy, Hold or Sell?
Cash Converters has achieved a total average annual shareholder return of 17.9% over the past decade. At today's market price Cash Converters trades on a P/E ratio of 17 and dividend yield of 3.3%. However the company recently undertook a distasteful private institutional placement which will likely result in falling earnings per share in the coming year.
Whilst dividends per share are not expected to be affected and the long-term outlook appears bright, investors must seriously consider whether they want to be part of a business which doesn't hold retail investors in the same regard as their "sophisticated" counterparts. As a shareholder myself, I'm seriously considering redirecting my funds elsewhere…
