Mobile Mini, Inc. is the nation's largest provider of portable storage solutions through an offering of lease fleet of nearly 26,000 portable storage units. The Company designs and manufactures portable steel storage units and acquires and refurbishes used ocean-going shipping containers for lease primarily in Arizona, California, Texas, Nevada, Oklahoma, New Mexico and Colorado. The company has 12 branch offices in seven states and the products provide temporary storage for a diversified base of over 28,000 customers, including Wal-Mart, Motorola, Frito Lay, Holiday Inns, Target, City of Phoenix and the Department of Defense. These customers use the Mobile Mini products for excess inventory, construction site storage, records and document storage and a host of other applications. The company products are produced from purchases of used ocean-going containers (ISOs), which are then refurbished and modified, or by manufacturing its own storage units. The company offers a wide range of products with an assortment of differentiated features such as those with the patented security systems, multiple doors, electrical wiring and shelving.
Since 1996 the company has been focusing on leasing rather than selling portable storage units and has been expanding the lease fleet since that time. Leasing offers the company several advantages in that, it provides the company with an incremental operating margin approaching 60% after recovery of fixed costs. The average rental rates will recover the cost of the investment usually within 26 months. In addition, lease programs have an average life exceeding 20 months and is a source of predictable, recurring revenues for the company.
Mobile Mini products include:
Refurbished and Modified Storage Units are used ocean-going containers shipping containers purchased from leasing companies or brokers. These containers are eight feet wide, 8'6" to 9'6" high and 20, 40 or 45 feet long. After acquiring an ISO container, the company will refurbish and modify it. Refurbishment typically involves cleaning, removing rust and dents, and installing new doors and the Company's patented locking system. Modification involves splitting containers into 5, 10, 15, 20 or 25-foot lengths.
Manufactured Storage Units. The company can manufacture portable storage units for its lease fleet and for sale. Manufacturing takes place at the company's one manufacturing facility in Maricopa, Arizona. The manufactured units can be up to 12 feet wide and 50 feet long and doors, windows, locks and other customized features can be added.
Records Storage Units. The company recently completed the design of a proprietary, portable record storage unit. The record storage units enable customers to store records at their location for easy access or at one of the company's facilities. These storage units feature high security doors and locks, electrical wiring, shelving, folding work tables and air filtration systems. This product is marketed as an alternative to the mass warehouse storage and provides fire and water damage protection.
Mobile Office Units. The mobile office units range from 10 to 40 feet in length office and can be configured as office and storage combination units that provide a 10 or 15-foot office with the remaining area available for storage. The mobile office units are equipped with electrical wiring, heating and air conditioning units, phone jacks, carpet and/or tile, proprietary doors and windows with security bars.
Situational Analysis
The storage industry consists of two principal segments, fixed self-storage and portable storage. The fixed self-storage segment consists of permanent structures away from customers' locations. The fixed self-storage are used primarily by consumers to temporarily store excess household goods. According to the Self-Storage Almanac, the fixed self-storage market exceeded $10 billion in 1997. This segment is highly fragmented but includes several large national companies such as Public Storage and Shurgard Storage Centers.
The portable storage segment is different from the fixed self-storage segment because it brings the storage solution to the customer's own location and addresses the need for temporary secure storage with immediate access. The advantages of portable storage include convenience, immediate accessibility, price and higher security. In contrast to fixed self-storage, the portable storage segment is primarily used by businesses. This segment is highly fragmented with no national participants. Although there are no published estimates of the size of the portable storage segment, the company believes there is increasing market awareness of the advantages of portable storage and that there is substantial potential to increase the size of the portable storage market segment. Refurbished ISO shipping containers and over-the-road trailers are the primary products used to provide portable storage.
In 1998, approximately 78% of the company's leasing customers were businesses, approximately 15% were consumers and approximately 7% were government, institutional and other. The company has more than 28,000 customers across a wide range of industries including retailers, wholesalers, commercial businesses, contractors, consumers, governmental agencies and hospitals and schools. The two largest customers accounted for only 4.3% and 2.1% of 1998 lease revenues. The sizable customer diversity demonstrates the broad acceptance of the products and the opportunity to generate future demand.
Financial Performance and Valuation Summary
Mobile Mini, Inc. announced record results for the three months ended March 31, 1999. The first quarter of 1999 represents the Company's ninth consecutive record quarter. Net income for the 1999 first quarter rose 145.9% to $1,311,000 or $.15 per share from last year's first quarter net income of $533,000 or $.07 per share. Revenues of $13,167,000 for the first quarter were 22.5% ahead of last year's $10,746,000, reflecting primarily increased same-store sales at all branches.
Thanks in part to a strong economy and stable steel prices, Mobile Mini has been experiencing solid growth and impressive financial performance. Another key ingredient for the company's recent success has been the aggressive move to emphasize leasing over sales. In the most recent quarter, leasing revenue rose 33% while the company's overall revenue grew by 22% and leasing revenues now make up about 76% of total revenues.
Financial Highlights:
Actual 1997 Revenues: $ 46.1 million
Actual 1998 Revenues: $ 52.7 million
Estimated 1999 Revenues: $ 62.8 million
Estimated 2000 Revenues: $ 77.4 million
Actual 1997 EPS: $ .32
Actual 1998 EPS: $ .53
Estimated 1999 EPS: $ .78
Estimated 2000 EPS: $ 1.03
Investment Outlook
The shares of MINI have performed well over the past couple of years, as the stock has returned 339%, or 86% annualized return compared to 27% for the S&P and 9.5% for the Russell 2000 small cap index. Since the lows of October 1998, the stock has been in a strong upward trend, and we don't see any sign of change in the near future. The economy is continuing very strong, and there are few signs of an imminent slowdown, this means a continued positive economic environment for many of the cyclical businesses. The focus on leasing has also worked very well for MINI as they have seen their operating margin improve from a little over 10% in 1994 to better than 25% at the end of 1998. The recent acquisition of privately owned National Security Containers, LLC, one of the larger portable storage leasing companies in the U.S., brings to 16 the total number of branch locations, solidifying MINI's leadership position in the portable storage market.
The downside risk to MINI is that, the economy after about eight years of strong growth begins to slow down, or inflationary pressures, particularly in producer commodity items such as steel begins to increase and eat into the company's operating margin. However, barring a significant change in the economic environment, we believe that this stock is attractively priced at current levels, and is likely to offer patient investors a very attractive upside return potential. The stock is currently trading at less than 18x current year's estimated earning, and about 25x trailing twelve months earnings. We have a 12 - 18 months price objective of $24 per share.
Subscribe to the Independent Analyst's Report
We are your source for timely stock selection, detailed reports and analysis. This is one of the few investment sites where you get more than just numbers from the past. We analyze not only the numbers, but also look at the strategic position of the company, and the short term technical factors affecting the stock. In addition, we continually monitor our recommended stock, and provide you with buy, hold, and sell updates.
For your monthly subscription, you will be guaranteed access to our stock picks and proprietary reports in our members only section. When we post a new report, it will be made available prior to the markets open and we will notify you via e-mail.
If you sign up today, you will be guaranteed these rates for one year, or until you decide to cancel.
The information provided are derived from many sources believed to be reliable although no guarantees are made as to the accuracy and completeness of the information. The information contained in this report is not intended to be and shall not constitute an offer nor solicitation to buy or sell securities. Investors are advised to contact the company as well as their broker or financial advisor before making any investment decision.
