GASEL TRANSPORTATION LINES, INC., (OTCBB: GSEL)

Dear Reader:

Many of you have written us to applaud the recent commentary from our favorite analyst, Doug Rogers.  Part one, released last week (click here), may have been his best work to date and assuredly we’ll get Part 2 – Technology Stocks - to you in the very near future.

But today we’re pleased to bring you a deeper inspection of one company by our esteemed analyst. Here he narrows his sights and delves into the business plan of one our previously featured companies, Gasel Transportation Lines, Inc. (OTCBB: GSEL).  We first published this intriguing story December 6, 2002, and our comprehensive profile is available on our site. (click here)

As you may recall, Gasel is a truckload contract carrier that is presently executing an aggressive growth strategy.  Doug Rogers has initiated research coverage on Gasel and we think you will be more than a little interested in Doug’s take on this company.  Also, don’t forget we have archived a great audio interview with Gene Thompson, Gasel's CFO, (clickhere for that interview).
 
 

Highlights From Doug Rogers' Research Report on GSEL

Company Info:

The traditional core component of the Company is a truckload contract carrier that transports truckload freight, dry & temperature controlled commodities and hazardous materials across the United States and Canada.  GSEL is committed to providing affordability and outstanding service to its various clients by negotiating competitive pricing arrangements based upon the type of material or commodity being shipped, the geographic distance of the shipment and the competitive landscape for a particular job route.  The Company minimizes operating expenses and is able to rapidly respond to changes in market demand and shipment requests by outsourcing its 192 drivers and 40 administrative staff from an industry specific employee leasing firm, or PEO (professional employer organization.  All drivers must still meet the stringent requirements that the Company itself determines and addresses potential attrition by offering competitive fees and benefits such as 401(k) participation, health and life insurance policies that are also offered through the PEO.
 

Valuation Info:

Current valuation ratios indicate that the Company is trading at a relative discount to overall market mean averages, indicating upside potential to investors.  GSEL’s price/book and price/sales on a rolling four quarter basis is 0.54 and 0.10, respectively, which is relatively undervalued compared to the December 2002 market mean average range for price/book of 1.4 – 2.5 and the mean average range for price/sales of 1.3 – 1.8.  Further, book value/share of $1.39 and a current trading price around $0.40 indicates solid upside potential as well.  We believe that the low valuation results are due, in large part, to the fact that the industry as a whole is out of favor from flat and/or slightly declining sales from the significantly decreased domestic and international freight shipments attributable to the depressed state of global economics. 

Industry Info:

Sources estimate that the trucking industry generates over $255 B in total annual sales, while For Hire or Common Carrier Trucking companies account for nearly $98 B annually.  The estimated average operating ratio for a trucking company is 95.2, which means that the average freight shipment company achieves 4.8¢ profit for every dollar of revenue received.  Slim margins in an industry that still dominates overall global shipping, but is moving towards a need for providing LTL local and “just-in-time” shipment capability could mean that consolidation is inevitable.  Currently, transportation demand is depressed throughout the supply chain with consumers damping the end of the chain with softer overall demand.  The long-term outlook for the industry as a whole, however, is very positive.  It is expected that the corporate economic landscape will demonstrate continued dispersal as producers seek lower cost operating locations, combined with increased demand for highly specialized, more service oriented LTL shipments should actually increase the intensity of demand for established freight carriers.  Further, the global trend towards JIT manufacturing and the limitation of inventories at all levels of the production supply chain will further stimulate demand for shipping, albeit on a more consistent basis.  Trucking companies will have to become versatile and streamlined in their operations to decrease costs, enhance earnings and meet the demands of the shift in paradigm through the proliferation of technology and consolidations or partnerships to offer a comprehensive suite of shipping options to producers and consumers alike.

We strongly encourage you to read the entire research report on Gasel Transportation Lines, Inc., which you can access on the ManageSource Research site (click here) or you may access the report directly (in .pdf format) by clicking here.

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