it seems when TA purchased the additional travel centers in Q1, they considered these "bargain" purchases at 4x EBIT. If that is accurate, and the same measure was applied to TA itself, then TA may be a "bargain" as well?
also I noticed in the 2008 annual report, TA spent $35,000,000.00 on just two (2) travel centers (one in TX and one in Cal.) This of course is an average of $17-18mm/center and this was in a normalized business cycle. Based on the average prices paid for these recent purchases it does appear TA picked these up at fire sale prices. Prime truck stop property is becoming more and more scarce and will become more valuable with time (especially with so many states closing rest areas there are many parts of the U.S. where truck parking is scarce).
The recent purchases were indead at fire sale prices...8 centers for total $50M including the cost of renovations is about $6.2M per center!!! Now that is cheap. During spin off they recieved about $20M per center from HPT I believe. In 5 year you see the valuation for these center will be at market price in a stable market fetching above $18-22M per site! Now these site will contribute to the revenue without the cost of rent adding substantially to the bottom line.
just something to think about - assuming TA can stay cash flow positive, and with TA management coming from a REIT background, we may be in more of a real estate play here than what many think? Like all good real estate it is all about location, location, location. The best sites along the U.S. interstate system are getting more and more scarce. The primo locations will only become more valuable in time and #1-very hard to replace,#2-the cost to build new travel centers in certain areas is already prohibitive, #3- TA management has spent much of their careers actively engaged in the real estate (re:HPT)...I have no doubt of their expertise in the real estate arena.
Again, so long as they can have positive cash flow and buy wonderful real estate at fifty cents on the dollar, the $1B @ high-margin retail, the fuel sales of $6B, the restaurants, the truck/tire repair shops...that is all icing on a very nice cake IMO. The market has woefully undervalued TA for the time being. This will change in time I believe (which is why I have loaded up on this stock).
* state governments are in financial straits and some are so strapped they are closing interstate rest areas. This is good for truck stops as it will have the effect of forcing more drivers to other alternate parking areas such as TA, where the drivers may spend more $? * new truck stop locations - much harder now due to local zoning laws against *anti-noise * anti-idling * anti-refrigerated trailer engine * anti- heavy traffic (especially big trucks). And again this will really BOOST the future values of existing-and already zoned-truck stop areas.
If someone had to start from scratch and build over 200 truck stops, the zoning, the land development, the interstate access & visibility, construction,etc I suspect it would cost exponentially more than the present entire market cap of TA? And I believe the market is MISSING the wonderful MOAT...and the bigger and stronger TA gets, the more TA can scale, the less competition they will have and the higher the potential profits.