RBD - Restaurant Brands

[percy]

Excellent interim.

[Snoopy]

'Profit' excluding non-trading items was $42.181m over FY2019. The associated earnings per share calculation is as follows::

2019: $42.181m /124.758m = 33.8cps

The information below is derived from Russel's AGM for FY2019 address.

The NPAT (excluding non-trading items) forecast result for the new financial year is in excess of $45 million. In 'eps' terms this equates to:

$45m / 124.758m = 36cps

At yesterdays close of $9.70, this represents a forecast PE ratio of:

970 / 36 = 27

That seems very high for a company growing earnings of 5 to 7 percent per year and whose IP consists of the detail working over of a restaurants internal layout.

In the half year FY2020 update Russell says:

"The Group expects to deliver a NPAT (excluding effect of NZ IFRS 16) for FY20 of at least 10% in excess of FY19"

So we are now talking an NPAT for FY2020 of:

$42.181m x 1.1 = $46.399m

HY 2020 profit already booked (excluding non-trading items and the effect of NZ IFRS 16) was $25m. So the profit in 2HY2020 needed to achieve our profit goal is:

$46.4m - $25.0m = $21.4m

That looks easily achievable, although I do expect the contribution from the start up operations of Taco Bell in Australia and New Zealand to be negative. Pizza Hutt profits in NZ plunging to an EBITDA of just $0.5m for the half, down 66% on the pcp is a worry though.

Excellent interim.

I concur. The historically high PE ratio I noted in a previous post looks a little more justified now that profit growth is forecast at 10%, up from 5-7% this year.

Profits will fall by probably $5.8m (2x the $2.9m half year profit fall) due to IFRS9 requirements though. So declared IFRS compliant profits for this year I expect will be lower:

$46.4m - $5.8m = $40.6m

Nevertheless, 'The market' doesn't seem too worried about this!

eps: $40.6m / 124.758m = 32.5cps

PER for 2020 based on Friday's $11.75 closing share price:

1175 / 32.5 = 36

That will require an eps growth rate of 36% between FY2020 and FY2021 to keep Percy happy! Heady days!

SNOOPY

[Stumpynuts]

Taco Bell opens it's first store in New Lynn Auckland today.
Any predictions for Taco Bell's impact on RBD's SP?

[Snoopy]

Taco Bell opens it's first store in New Lynn Auckland today.
Any predictions for Taco Bell's impact on RBD's SP?

A couple of stores in NZ and Oz are not material to the RBD business. So the real effect will be the growth potential these early stores show as a portent to the potential opening of many more Taco Bell stores.

The nearest equivalent event I can think of was the rolling out of the Carl's Junior brand in NZ a few years ago. I recall customers queued out the doors and reports that is was the most successful launch of the Carls Junior brand in any new market to date. Yet a few years down the track, the roll out of new Carl's Junior stores has stopped, and it remains marginally profitable at EBITDA level. Put back the depreciation and allocate an appropriate percentage of head office expenses and one might argue Carl's Junior is not yet profitable.

I think the start up of Taco Bell in NZ and the reboot in Australia are a sop to master franchise holder YUM Brands, who also franchise KFC worldwide. I am not sure a down market Mexican food chain will gain any real traction outside of the Americas, and predict that Taco Bell will be a loss making distraction for RBD management in Australia and NZ, albeit a necessary one to keep YUM happy. However if by opening Taco Bell in Australasia, it allows RBD to continue on their international KFC expansion plans - where the real money is - then I will put up with it. It has all been well signalled so far, so I say no effect on the RBD share price

SNOOPY

[Balance]

Snoopy’s assessment of Taco Bell for RBD - bang on nail on
the head.

As for the long queues at the openings of all these new outlets - they all employ the same techniques to create the illusion of intense interest & demand. Yawn.

[Jonboyz]

Tried out the new Taco Bell store yesterday. I shouldn’t have gone with such high expectations. The store itself looks nice (although the ‘bouncers’ limiting the number of patrons through felt a bit Sopranos), but the food was way over-priced for what you get. The Cali burrito was mostly just dough-wrap with a piddly amount of filling. The taco looked like an hors d’oeurve—I would have needed at least 4-5 to fill up a lunch.

I think RBD are going the wrong direction with this. They’re charging fancy prices, with fancy drinks (eventually), but the food isn’t fancy. It’s plain. I hope they either lower their prices and go for the true fast-food customers, or improve their food significantly (both in substance and in taste).

[Snoopy]

Tried out the new Taco Bell store yesterday. I shouldn’t have gone with such high expectations. The store itself looks nice (although the ‘bouncers’ limiting the number of patrons through felt a bit Sopranos), but the food was way over-priced for what you get. The Cali burrito was mostly just dough-wrap with a piddly amount of filling. The taco looked like an hors d’oeurve—I would have needed at least 4-5 to fill up a lunch.

I think RBD are going the wrong direction with this. They’re charging fancy prices, with fancy drinks (eventually), but the food isn’t fancy. It’s plain. I hope they either lower their prices and go for the true fast-food customers, or improve their food significantly (both in substance and in taste).

Thanks for your report Jonboyz. Out of curiosity I got on the net to have a look at the Taco Bell menus and pricing in Hawaii. For some reason I found myself blocked from accessing this information. Anyone else able to get into the official website? No matter, I found what I was after here:

https://1000menuprices.net/taco-bell...ces-in-hawaii/

The NZ menu can be found here:

https://static1.squarespace.com/stat...+Bell+Menu.pdf

Of course the menus are not exactly the same in NZ and Hawaii. But a comparison of 'like named' items is nevertheless telling:

	Hawaii	New Zealand
Double Taco Supreme	$US3.31/0.63= $5.35	$8.50	(basic)
Double Taco Supreme Combo	$US3.71/0.63= $5.89	$12.00	(basic)
Grilled Stuft Burrito	$US5.31/0.63= $8.43 (XXL)	$8.99	(luxury)
Chicken Queasdilla	$US1.33/0.63= $2.11 (mini)	$6.99	(basic)
Soft Drink (Coke)	$US1.98/0.63= $3.14 (480ml)	$3.60 (420ml)

Those NZ prices include GST and the Hawaiian prices may not include sales tax. If someone can tell me the sales tax rate in Hawaii I will amend those US prices.

The prices don't look so different when converted into $NZ, except the 'basic' items look to cost less in the US. I think the niche for a new entrant in the Mexican food market is 'basic'. So I hope the strategy of trying to be 'mid market' when the product is 'anything but' will not backfire in NZ.

SNOOPY

[winner69]

You guys have put me off already, esp the bit about the size of the tacos

Think i’ll Stick to the local if Taco Bell ever come to Wellington

https://www.vivamexico.co.nz/product/flautas/

[etnom]

[QUOTE=winner69;778384]You guys have put me off already, esp the bit about the size of the tacos

From when have Cool Cats started having a sniff at tacos

[Raz]

Thanks for your report Jonboyz. Out of curiosity I got on the net to have a look at the Taco Bell menus and pricing in Hawaii. For some reason I found myself blocked from accessing this information. Anyone else able to get into the official website? No matter, I found what I was after here:

https://1000menuprices.net/taco-bell...ces-in-hawaii/

The NZ menu can be found here:

https://static1.squarespace.com/stat...+Bell+Menu.pdf

Of course the menus are not exactly the same in NZ and Hawaii. But a comparison of 'like named' items is nevertheless telling:

	Hawaii	New Zealand
Double Taco Supreme	$US3.31/0.63= $5.35	$8.50	(basic)
Double Taco Supreme Combo	$US3.71/0.63= $5.89	$12.00	(basic)
Grilled Stuft Burrito	$US5.31/0.63= $8.43 (XXL)	$8.99	(luxury)
Chicken Queasdilla	$US1.33/0.63= $2.11 (mini)	$6.99	(basic)
Soft Drink (Coke)	$US1.98/0.63= $3.14 (480ml)	$3.60 (420ml)

Those NZ prices include GST and the Hawaiian prices may not include sales tax. If someone can tell me the sales tax rate in Hawaii I will amend those US prices.

The prices don't look so different when converted into $NZ, except the 'basic' items look to cost less in the US. I think the niche for a new entrant in the Mexican food market is 'basic'. So I hope the strategy of trying to be 'mid market' when the product is 'anything but' will not backfire in NZ.

SNOOPY

If you were comparing disposable income basis, social/economic, you would look at dollar for dollar, Taco Bell in the US is budget. Hawaii is expensive for a US state and given the level of tourism. It's the place you go in the middle of the night en-route on a long road trip...starving is the prerequisite to enjoy the food, always drive through as the car park and around the restaurant is borderline dangerous. It food for the masses of working poor in the US, although I will say i actually like it