Yeah that's why I am also a bit undecided on the stock. Being out of the country it is hard to gauge how popular something is and I get a distorted view from the people that I do ask.
Sad but true-ish I guess...
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Back into channel
Well Percy, despite what 'the market' was hinting at before the result was released (with the price drifting down to $2.85), I think that yours and Macquarie's confidence has been vindicated.
I got excited when I heard on the radio that the result was up 20%. But then I found that figure included "non-trading items". The real operational after tax net profit was up 6.8%. Nevertheless in a tough retail market, and with Carl's Junior still very much in development phase, this was rather better than I expected. A modest increase in dividend accompanies the higher profit too. Meanwhile the gearing ratio is down from a moderate 19% last year to just 11% at balance date.
I expect to remain a Restaurant Brands junkie for many years to come on the strength of this result.
SNOOPY
discl: hold RBD
I have a very modest holding left over from a selling mistake about 5 years ago (I sold slightly less than my holding) which does mean however that I get a free dinner once a year. But just looking at the share price so now and then in the paper I get the feeling that the $3 mark seems to be a very tough nut to crack?
Great result
Even with refurbishments and the roll out of Carls (with no gain) the cash flow has managed an increased dividend and repaid nore than $6m of debt.
Cant do much better than that
Current cash flows support a share price of $3.70 to $4.20, even using modest future growth rates of 5% to 7%
That $3 mark seems hard to break through .....but I have a feeling that once it does break through (soon) than the share price could easily head to $3.50 plus (by Xmas eh)
Another attempt at the top of the range, a break should give a run to 3.30 me thinks. Weird this company so under- performed the nzx dont ya think when you look at similar companies in aus have gone gang-busters.
Reuters consensus is 3.2 at the moment but not sure if its updated for latest results
If you go to page 43 of the FY2013 Annual Report, then look under 'Analysis of Expenses', you will see that RBD paid $18.560m in Royalties last financial year. That covers the KFC and Pizza Hut brands that are owned by YUM. But is also covers Starbucks and Carl's Junior that are not owned by YUM. There is no specific breakdown in the segmented results which tells exactly what franchise fee amount goes into each of the four boxes ( KFC, PH, Starbucks and Carl's Jumior).
If you take the franchise fees paid in total and divide it by the total operating revenue I get:Quote:
Years ago when I looked it was 10% of gross revenue.
Do you know whether it has changed.?
$18.560m / $311.813m = 5.95%
However, it may net be quite as simple as that, as I will explain in my next post.
SNOOPY
I need to take you back to 21st May 2003, when a shareholder Mr G Bulling put a resolution to the AGM that RBD should fully disclose their franchise fees. The issue was not the annual franchise fee, but the once in ten year renewal fee that allowed RBD to keep operating their brands in NZ under the master franchise agreement. The resolution was lost as the board deemed such information commercially sensitive. But the board had this to say about franchise fees:
"Shareholders may take as a reference point the renewal fees disclosed for the original purchase of 122 stores ( Pizza Hut and KFC ) from Pepsi, ie $55,000 per store adjusted by the New Zealaand CPI from 1997 to the renewal date in 2007."
It is now 2014. So if we look at the CPI data since that time:
http://www.rbnz.govt.nz/statistics/k...phs/inflation/
Than use 2.5% as an average inflation figure,the renewal fee in todays dollars given the 17 years elapsed since 1997 can be estimated as follows:
$55,000 x (1.025)^17 = $55,000 x 1.52 = $83,600 per store for a ten year period. That translates to $8,360 per store per year. Last year RBD has 177 stores at year end. I would argue you should amortise this one off cost over each year of the ten year franchise agreement. So the amount amortised each year shoud lbe:
177 x $8,360 = $1.479m
Add that to the actual franchise fees paid above:
($18.560m + $1.479m) / $311.813m = 6.42%
So sorry Percy, I still can't get to your 10%. But there is one more chapter to round out this story.
SNOOPY