Dollar Financial Unit Buys Stores - Analyst Blog

In order to expand its footprint in the Canadian markets, National Money Mart, the wholly owned Canadian subsidiary of Dollar Financial Corporation (DLLR), acquired nine franchise stores in the Alberta region for approximately C$13.0 million ($12.9 million).

Following the acquisition, Dollar Financial expects the EBITDA for the acquired stores to be approximately C$3.0 million for a year, including transition costs.

In addition, the acquired stores will provide Dollar Financial's products and services, including short-term loans, check cashing, gold purchase, Western Union money transfer, foreign exchange, as well as debit cards.

Dollar Financial is on track to rapidly capture the Canadian markets, as per the new regulatory environment, by increasing financial services market share in the country through the continuing expansion of the Dollar Financial's store footprint, mass media advertising campaigns, and by offering products and services at prices below the competitors'.

Moreover, Dollar Financial is looking forward to a program to ensure the development of the under-penetrated markets through continued de novo store openings and the acquisition of franchised stores and competitor store locations.

With the acquisition of nine stores, Dollar Financial's unit will now operate a network of 412 company-operated stores across Canada, with an additional 53 franchised stores remaining in the network as of November 10, 2010.

Apart from Canadian markets, Dollar Financial opened 14 new stores in the United Kingdom during the third quarter of 2010, and expanded its Internet media and local area marketing programs in the Merchant Cash Express business and in the Financial Services business.

Dollar Financial also opened its first gold buying store in Gdansk, Poland, and expects to open additional company-operated stores in the country, pending the success of this pilot store.

As of September 30, 2010, Dollar Financial's global retail operations consisted of 1,193 locations, including 1,067 company-operated financial services stores and 126 franchised and agent locations, conducting business primarily under the names Money Mart, Money Shop, Loan Mart, Money Corner, Insta-Cheques and The Check Cashing Store in Canada, the United Kingdom, the United States, the Republic of Ireland, and Poland.

Dollar Financial has a solid liquidity position, with approximately $200.0 million of funds available for investment in accretive opportunities that will further enhance future earnings as well as expand and grow the business across the globe.

However, we remain concerned about the risks related to Dollar Financial's tax strategies, extremely fragmented nature of business and international dependence. Nevertheless, an exposure to a somewhat recession-proof sector and cost containment measures will drive growth.