AMERCO: Another record quarter:
Ian Gilson, CFA
On August 8, 2012 AMERCO (UHAL) reported is first fiscal quarter results for fiscal 2013. The numbers were a first quarter record and very close to our estimates, as shown below.
Revenue was driven by improving local and one-way transactions. Truck utilization improved which caused the operating expense ratio as percentage of rental revenue to improve slightly Y/Y. U-Haul has been adding to its fleet, net of sales, which has a benefit of reducing maintenance expenses and provides vehicles for growth.
The U-Box business has expanded to all company owned self storage facilities (between 12,000 to 13,000 locations). This business is growing rapidly but is not yet large enough for management to consider it material relative to total revenue. Revenue is included in other income. However, the expenses are included in the moving and storage group.
Revenue from self storage has remained close to $34 million a quarter and management intends to increase the number of facilities and square footage. Occupancy rates are close to 80%. SAC Holdings has paid down its debt to AMERCO so there is cash available for expansion. U-Haul receives management fees from SAC so there is no incentive to buy facilities from them. All self storage facilities, both U-Haul and SAC, are truck rental sites so adding storage has a positive effect on future growth in two ways.
AMERCO has benefitted from declining interest rates. Both lease expense and interest expense has been constant over the last few quarters. With $56 million a quarter of combined lease and interest expense, up from $54 million in the fourth quarter of 2012, good financial management has been a positive factor for many years.
At the current price the stock is selling at a lower valuation than most of its peer group yet it has the highest return on equity. We believe that the stock will outperform its peer group, and the overall market, over the next six months. Our valuation methods use Earnings Before Interest Taxes Depreciation Amortization (:EBITDA) and EBITDA plus Lease expense (:EBITDAL) since the company can buy (using borrowed moneys and generating depreciation) or lease depending on the lowest cost to the company.
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