JMHO, CAR already refi'd ALL of the $550m 2017 corp debt due. Pushed out to 2024. You left out that SRS investment mgt, a tiger cub, owns 22% of the shares outstanding (9.5% of shares + 12.5% through synthetic swap position) and they now have two people on the board. I think/hope they will put pressure (be a catalyst) for getting mgt to more aggressively cut costs? Clearly CAR (and HTZ) are undervalued (unless U#$%$ recession) Though I think Enterprise is best in breed for profit margins, rev growth, AND marketshare, the three most important business / industry metrics. Also, I would rather have the HTZ mgt team then the CAR mgt team, they are shaking things up at HTZ, CAR mgt is steady, but incremental. Again, JMHO.
The CFO for HTZ, Tom Kennedy was CFO for Vanguard Group the parent of Alamo/National when Enterprise acquired them. He then worked for Enterprise during the transition. He stated Enterprise has industry leading Ebitda margins of between 20-22% when he was there - and thats what HTZ will be driving toward when he (and HTZ mgt) gave their 3 year plan in Nov 2015 during their investor day.
And I am long CAR, especially at these prices. If they come anywhere near their FCF guidance for 2016 of $450-$500m its trading 4.0-4.5x FCF. Seems too cheap at these prices, imho. I can only hope SRS lights a fire on them, with their equity AND swaps they own a whopping 22% of CAR stock. They need this to get turned around.
I don't even know who ABG is, and no I don't work for CAR or HTZ. The reason I propose these solutions is bc Enterprise has ebitda margins of ~20% yet CAR is at 10.6% and HTZ is also at 10% but, on it way to 16-18% ebitda by 2018 (goal). Cant win when your competitors are eating your lunch. This is a no-growth business, thus, CAR needs to get more competitive on cost structure.
Move HQ out of NJ - highest cost state in the nation and high state taxes. Break the leases get state money (like HTZ did) to Relocate to FLA, TX or NV. Expedite implementation of technology, especially kiosks at all rental car outlets, cut outlet staff by 20% - while decreasing wait times. Continue to strengthen board, several BoD's add little to no value. Get rid of Larry De Shon who is an incrementalist, with no clear vision of the future. This company needs an overhaul based on creative, out of the box thinking, not his entrenched plan that lacks vision. They are third best out of 3 industry players, but should be focusing and communicating how they will be THE BEST in the industry. I think HTZ is ahead of CAR on rethinking the business, thanks to Icahn's board members, and certainly ahead on cost cutting.
More pricing pressure announced by HTZ today, both stocks hit. Like I said, CAR needs to cut its expenses to get them in line with industry leader, Enterprise. Once all three have similar margins, the price war stops. But for now, Enterprise can "out-discount" both HTZ and CAR b/c they have industry leading cost structure (i.e. they are they low cost producer - econ 101). HTZ understands this and is cutting its costs dramatically, CAR isn't, but needs to, hopefully SRS puts some pressure on CAR mgt.
I had thought HTZ was in the process of winding down that relationship with CAR, since they were aggressively selling off the shares they owned. I saw that HTZ very recently (after I had written CAR to buy CAR;) announced they extended the relationship a few extra years.
Either way, since CAR is the smallest of the 3 in auto rental, I think its most likely they are the target of a buy-out at some point.
in my experience, always redundancies at corporate HQ's. & bring Payless, Zipcar and Avis under one roof. move out of high cost/tax state of NJ like HTZ did, which could probably save $50-$75m.
just a symptom of posting on yahoo mb's. most are mindless. everyone once in awhile you find someone like you, who actually knows something about a company. I still think there are costs to be cut at CAR too.
in no way am i saying they should not improve their IT/analytics. I agree with you on that point. but i also think the additional $50m in capex should have been offset with cuts in other places.
But as of yet, they have no pricing power? Though maybe with the cost inflation, we get some pricing power this year, but analysts and investors have been hoping for that for 3+ years now. I still think that HTZ is the correct model striving for 16-18% ebitda margins through cost cuts, and CAR needs to more aggressively rationalize its expense structure to stay competitive, imho.
Interesting thesis. since we are speculating, what about a buy-out form China Auto Rental,(China's biggest rental co), which allows the combined co to get true global scale? They could still switch the fleet over to Chinese made cars over time.
One potential problem with waiting for "patient money" ie. chinese white night, is that the global economy could go into recession sometime in next few years and a cyclical co like CAR's equity value gets decimated. Thats when the Chinese bidding starts?
I will say, that SRS has accumulated a truly massive position (when you factor in the swaps), which are time sensitive. Management needs to cut costs radically (like HTZ) if they want to set the stage for the co to be acquired, imo. If i was CEO, I'd aggressively rationalize the biz and put the co up for sale, only way to maximize shareholder value at this point in the cycle.
Supor, whats your thoughts on why CAR doesn't publicly endorse a stated cost-cutting plan like HTZ to rigorously rationalize the business and aim toward adj ebitda targets of 16-18% by 2018+/-?