Burson Group Ltd (ASX: BAP) has taken its first steps toward closing off a gaping hole in its geographic network after it announced that the opening of its first Western Australian store is imminent.
Geographic expansion
In an announcement to the market this morning, Burson Group, which is Australia's largest trade-focused distributor of automotive aftermarket parts, advised that its first Western Australian store would open on Tuesday, 2 June 2015, and would be located in Malaga, Perth. Adding to that, another three stores will be opened in the state over the next three months.
As highlighted by the Fairfax press, the Malaga store will be 1,200 square metres, which is twice the size of the ordinary Burson store. As such, it is likely to act as something of a superstore to feed any future stores in the area, which is important due to the time it takes to receive the shipped goods from its distribution centre located in Melbourne.
While Burson only has the one distribution centre currently, it is in the process of opening a second centre in Brisbane which will likely allow for greater operating efficiencies.
It is also pleasing to note that the company has opted for a greenfield expansion into the state, as opposed to undertaking a state-wide acquisition. Although it will be a slower expansion process, it will allow Burson Group to minimise its exposure to risk whilst also keeping a lid on its debt levels.
Although the Western Australian stores were the highlight of today's market update, the company also advised that it had opened its 122nd store in Orange, NSW in April 2015 while it will open a further seven stores over the next two months (excluding those in WA). A mixture of greenfield sites and acquisitions, this will include stores in Wollongong (NSW), Rockhampton (QLD), Beenleigh (QLD) and Canberra (ACT) and will take the company's total store count to 133 by July 2015.
Guidance
The Group's Chief Executive Officer, Mr Darryl Abotomey, took the opportunity to confirm that the company was "well ahead" of its target schedule of having 175 stores by June 2019. The CEO also said: "The opening of Burson stores in Western Australia and the Australian Capital Territory are a significant milestone in the growth of Burson's store network. We will have stores in every state and territory in Australia further enhancing our ability to service our customers."
On a final note, investors should also be aware that the Fairfax press is reporting that Burson will examine Metcash Limited's (ASX: MTS) automotive division (which includes Autobarn and Midas) as a potential acquisition. The media company quoted Mr Abotomey as saying: "We make a point of looking at everything in our industry… There's not a lot of overlap. It could give us some other benefits. We'd only do it if it made economic sense."
Again, it is pleasing to see that the company is willing to explore strategic opportunities, whilst also maintaining composure so as to not overpay.
As it stands, the shares are trading at $3.12, up more than 70% since it listed on the ASX in April last year. However, with strong growth prospects and an excellent management team, it seems that the stock is still presenting as great value at today's price of $3.12.
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