RBD - Restaurant Brands

[Snoopy]

This is the net profit, excluding non-trading items, divided by the total sales for the year. Note that in a change from the 2015 perspective I am now including 'other revenue' as part of the representative ongoing revenue of the company. This is because the largest part of other revenue is money received from YUM to act as master franchise holder for Pizza Hut in New Zealand. And this is a revenue stream that will be ongoing

2014: $18.863m / $330.399m = 5.7%
2015: $22.523m / $372.803m = 6.0%
2016: $24.207m / $404.095m = 6.0%
2017: $30.567m / $517.549m = 5.9%
2018: $40.361m / $766.289m = 5.3%

Conclusion: Fail Test

Reprising the 'Achillies heal' from the Restaurant Brands result from last year: net profit margin.

This is the net profit, excluding non-trading items, divided by the total sales for the year. Note that in a change from the 2015 perspective I am now including 'other revenue' as part of the representative on-going revenue of the company. This is because the largest part of other revenue is money received from YUM to act as master franchise holder for Pizza Hut in New Zealand. And this is a revenue stream that will be on-going

2015: $22.523m / $372.803m = 6.0%
2016: $24.207m / $404.095m = 6.0%
2017: $30.567m / $517.549m = 5.9%
2018: $40.361m / $766.289m = 5.3%
2019: $42.2m / $794.0m = 5.3%

The profit margin hasn't got any worse, which is a positive. But it hasn't got any better either. Our Russel has given an object lesson in how to reduce profit margins.

Conclusion: Fail Test

SNOOPY

PS Not tempted to top up at today's close of $8.65 either!

[blackcap]

Thanks for all the free analysis provided here Snoopy. I do appreciate it and it has helped me not purchase new RBD shares with my $9.45 money and will actually be looking to deploy it elsewhere unless I can get RBD for under $7.50 now. (yes I have changed my parameters). I cannot see them going anywhere with a PE of 26. Just too high.

Went to RBD (KFC) store in Dannevirke of all places a few weeks ago and the Mrs who only goes once every 10 years thought she would be clever and order the "Veggie Burger". To her chagrin and my mirth the veggie turned out to be a hash brown. I mean really KFC. That is just terrible. Anyway suffice to say I had a 3 piece quarter pack and was happy with my purchase.

[winner69]

Russel said shares would be 10 bucks one day

Russel a good guy

Looks like Russel will need to keep dreaming

Axing the dividend won’t help ...but most who got the 945 might forgive them this time round.

In the dark old days when despair reigned the divie was about the only thing that supported the share price ..but they were good divies.

RBD might do a Telecom / Spark - when they slashed the dividend the share price started slip sliding away never to reach the highs again.

Snoopy me old mate let’s reminisce with this bit from Gaynor in the NZ Herald in 2004

On August 15, 2000, the same day as the bid for the remaining 20 per cent of AAPT was announced, chairman Roderick Deane told the market that the telco was changing its payout ratio to 50 per cent because of its growth outlook.

Immediately before the announcement, Telecom's share price was $7.55. It plunged to $4.81 by the year-end and the dividend was cut to 20c a share where it has remained until the 2.5 cent increase in the March quarter (the 12-month dividend is now 22.5c).

[Balance]

Axing the dividend won’t help

I think it is very clear from the Takeover document that priority will be given by the new owners to 'growth', rather than using cashflow to pay dividends.

And given the amount of wealth they already have, last thing on their mind will be dividends! It is all going to be about growth.

So over time, it is inevitable that those seeking dividends will sell out.

Question - will NZ market ever embrace a 'growth' stock with less than double digit growth rate?

[Snoopy]

Looks like Russel will need to keep dreaming

Axing the dividend won’t help ...but most who got the 945 might forgive them this time round.

The $10 share price is an aspirational hurdle only now. How many here remember when Nigel Morrison took over as CEO of Sky City and announced that his target was to increase the SKC share price to $10? $10 sure sounds good though.

That $10 share price target for RBD shares was linked to the granting of performance options to Russel and Grant Ellis. But with Global Valar on the scene, they got given the free shares anyway. I expect we shareholders will be asked to support a new senior management share package in due course, which may or may not include that $10 target.

In the dark old days when despair reigned the divie was about the only thing that supported the share price ..but they were good divies.

RBD might do a Telecom / Spark - when they slashed the dividend the share price started slip sliding away never to reach the highs again.

Snoopy me old mate let’s reminisce with this bit from Gaynor in the NZ Herald in 2004

On August 15, 2000, the same day as the bid for the remaining 20 per cent of AAPT was announced, chairman Roderick Deane told the market that the telco was changing its payout ratio to 50 per cent because of its growth outlook.

Immediately before the announcement, Telecom's share price was $7.55. It plunged to $4.81 by the year-end and the dividend was cut to 20c a share where it has remained until the 2.5 cent increase in the March quarter (the 12-month dividend is now 22.5c).

In fairness, I would suggest that there is more technology risk in a Telco than a company that serves up chicken pieces. The AAPT acquisition turned out to be a flop. But whether that could have reasonably been foreseen at the time of the acquisition is another matter.

I think many of us would have experienced a vast change in the way we consume Megabytes over the last fifteen years. Yet the microbites needed to consume chicken require much the same hardware as they did in 2004.

SNOOPY

[winner69]

Snoops ...Russel often mentioned the 10 bucks as the share price increased ....even if it was a bit of inside joke.

[winner69]

Down 8% since profit announcement

I can see this going down to the mid 700s in next month or so

[Snoopy]

Down 8% since profit announcement

I can see this going down to the mid 700s in next month or so

$7.50/33.8 = 22.1

A PE of 22 is still a good growth premium. But if the Taco Bell rebuilds in Hawaii go as well as the KFC rebuilds did in NZ, and more scale can be obtained from the KFC operation in NSW, then who knows? KFC in NZ now trying a new 'motorway stop' branch. The KFC 'dine in experience', free of pesky motorised customers, is going from Auckland to other NZ cities. Lots of incremental opportunities here. The big question is, what will Global Valar bring to the business?

Russel gave an interview on RNZ this morning that hinted at not needing new capital. I thought that was a bit odd considering security of access to new capital was mentioned as a driving force to accept the partial takeover.

RBD still in the NZX50 index I think, but not for much longer? I wonder when the index funds will be forced to sell out? That might be the top up buying opportunity that some on this thread are looking for?

SNOOPY

[Balance]

Down 8% since profit announcement

I can see this going down to the mid 700s in next month or so

PER of 18 to 20 is more appropriate for the company until it proves that it can grow double digit earnings rate again.

So $6.00 to $6.70 should be where it settles.

[sonny n share]

Kentucky Fraud Chicken: How a man got free KFC for a year
https://www.nzherald.co.nz/lifestyle...958&ref=clavis