CORPUS CHRISTI, Texas -- Susser Holdings Corp. CEO Sam Susser discussed MLPs, convenience store expansion and natural gas with flamboyant TV financial guru Jim Cramer on CNBC's "Mad Money" on Thursday. Cramer called Susser's business model "an intriguing story."
He focused on the recent spinoff of Susser Petroleum Partners LP master limited partnership. "It's the MLP we are interested in with a bountiful 7.2% yield," Cramer said.
"Susser Petroleum is all about connecting with buyers … including the gas stations of its parent as well as other small mom-and-pop operations; 90% of their volumes are based on long-term fee based contracts where they get a fixed profit of 3.4 cents per gallon that they ship. That's the consistent utility-like business model that we really like."
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Sam Susser said that the company spun off the MLP because the fuel distribution side of the business is "more stable" than the retail side, which is subject to volatility with fuel margins.
Cramer said Susser has "terrific growth prospects" because the Stripes convenience store chain "is dominant in Texas and expanding quickly. They have a $235 million capacity on a revolving credit facility that can allow them to do acquisitions."
But he wondered, "Why can't this be a regional to national store?" He pointed out that "the more Stripes stores [Susser puts] up, the better the limited partnership should do."
Sam Susser agreed, referencing "incremental gross profit," and he said, "We're going to build about 26 this year. We have guidance for 28 to 35 next year. … Our business has wonderful scalability, Jim. We think we will continue to expand our footprint."
But he emphasized that the expansion would be limited to the company's core markets of Texas, Oklahoma, New Mexico and Louisiana. These markets "have fabulous demographics and they are very, very large. … It's a large territory with major population centers. … We see the opportunity to build a larger, stronger business continuing in our trends in the coming years."
Cramer also asked Sam Susser if Stripes would ever pump compressed natural gas.
"We will have a couple of sites in test mode in the next six months, Sam Susser said. "We are looking at partnering with major oil producers in the Permean and Eagle Ford shale play, which are big markets for us, very important markets, and we are working with a couple of large producers that want to try to get that product to market, and we're going to test it and see how it does, and if there is an appetite, we're going to continue to grow that and we'll distribute natural gas as well.
Susser Holdings said earlier in the week that for its third-quarter 2012 ended September 30, it expects to report same-store merchandise and fuel volume growth. Susser Holdings and Susser Petroleum Partners will release their complete third-quarter 2012 financial and operating results before the market opens on November 7 (see Related Content below for previous CSP Daily News coverage).
Corpus Christi, Texas-based Susser Holdings is a third-generation, family-led business that operates approximately 550 c-stores in Texas, New Mexico and Oklahoma under the Stripes banner. Restaurant service is available in more than 340 of its stores, primarily under the proprietary Laredo Taco Co. brand. Susser Holdings also is majority owner and owns the general partner of Susser Petroleum Partners, which distributes more than 1.4 billion gallons of motor fuel annually to Stripes stores, independently operated consignment locations, c-stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.