Expansion with the cost effective method
The company captures 12% market share in the off-airport car rental market, which is an $11 billion market in the U.S. To increase its market share, it is continuously adopting various strategies such as expanding its off-airport presence with cost effective video kiosks at various locations for $10,000 each rather than a brick and mortar locations, which would cost $150,000 each. These kiosks allow customers to interact live with an employee on the video screen. Additionally, it is incorporating its technology of “Hertz Global Holdings, Inc. (NYSE:HTZ) on Demand” in its off-airport segment, which will book a car 24/7 with the help of Internet, which was not previously the case.
Along with the market share upsurge, profit margins will increase from 18.1% in 2012 to 24.6% in 2014. Also, the company’s EPS will increase from $1.36 in 2012 to $1.88 in 2013.
Expansion in Brazil market for additional revenue
Therefore, on July 15 SBA Communications Corporation (NASDAQ:SBAC) entered into an agreement with a Brazilian telecom company Oi SA (ADR) (NYSE:OIBR), and the deal is expected to close by the end of this year. SBA Communications Corporation (NASDAQ:SBAC) will pay $302 million to the Brazilian company, and in return, it will have access to Oi SA (ADR) (NYSE:OIBR)’s 2,113 towers in Brazil. SBA Communications Corporation (NASDAQ:SBAC) funded this agreement with available cash and available credit facility. These towers will contribute $32.2 million of revenue and $67.3 million of cash flows by the end of 2014. In addition, company’s total tower count will reach to 20,000 globally.
On completion of this deal, Oi SA (ADR) (NYSE:OIBR) will sign a long-term agreement with SBA Communications Corporation (NASDAQ:SBAC) to lease and rent the antenna space required within these towers. This will help in meeting the rising smartphone demand in Latin America as the market continues to attract providers. Currently, there are approximately 1.15 tenants per tower, which is below the average of 1.5 tenants per tower in Latin America. This low tenant ratio and smartphone usage will generate further growth opportunity for Oi SA (ADR) (NYSE:OIBR) to attach more tenants in these towers.
The company’s site leasing segment is a major revenue driver contributing nearly 97% of its total revenue. This segment reported growth of 58% in the first quarter year-over-year. To continue to enhance its leasing revenue, it planned to upgrade its tower sites with 4G network. By now, it has upgraded 40% of its total sites and will upgrade 90,000 towers with 4G network by the end of 2014.
With the high demand for 4G network, its strong client base like Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) will be shifting their networks towards 4G. This will Increase the companies site leasing revenue from $846 million in 2012 to $1.1 billion in 2013, followed by $1.2 billion in 2014.
Conclusion
With the strong opportunity available in the market, all the above companies are expanding to increase their market presence, leading towards higher profits. Hertz Global Holdings, Inc. (NYSE:HTZ) is taking cost-initiative methods and is expanding in off-airport business segment. It is also shifting from brick and mortar to video kiosks, furthering its cost-effective measures.
SBA Communications Corporation (NASDAQ:SBAC) and Oi SA (ADR) (NYSE:OIBR) are coming to an agreement for enhancing SBA’s presence in Brazil. Further, SBA is also converting its tower sites to 4G LTE, which is in huge demand, and will increase its site leasing segment. Therefore, in the long run all three companies will be strong performers and will continue to drive the shareholders return higher. So, I recommend a long term buy for all three companies.
The article Buy These High Performing Companies This Month originally appeared on Fool.com and is written by Shweta Dubey.
Shweta Dubey has no position in any stocks mentioned. The Motley Fool owns shares of Hertz Global Holdings. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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