RBD - Restaurant Brands

[Deev8]

You cant compare Dominos with Pizza Hut.

I would say that comparing two companies in a similar line of business - they both sell pizza - could be quite useful.

[Snoopy]

My purchases are part of a carefully controlled 'thrust into retail' strategy. Why retail? Because it is liable to be the worst performing sector over the next twelve months. Everyone knows that which is why prices in that sector have been hammered down. And now is the best time to take advantage of that negative market sentiment.

The retail market is a contiuum of 'consumable essentials' to 'big ticket discretionary spending'. The most essential consumable is food. It doesn't matter what happens in the economy. People still have to eat. Also RBD is a cash business. RBD don't have to worry about people not paying for their pizza on account! So IMO from a global ongoing business perspective, RBD is low risk.

So why not wait until the share price turns before investing? Well the first leg of any recovery is always the safest. And I cannot earn anywhere near the amount from cash in the bank as I can from RBD shares.

Bad news for the retail sector today:

Pumpkin Patch predicting further declines in sales....

Hallensteins delaying the move of their purchasing centre to Australia.....

So I have taken the opportunity to pick up another helping of Restaurant Brands shares - my biggest ever buy up in terms of number of shares (if not in dollars).

That's because I decide how much money I want to spend well in advance. And if the share price goes down in the interim, I just buy more shares on the day. That is how 'value averaging' works - to make sure you buy more shares when the price is low and fewer shares when the price is higher.

RBD is the one retail share where the MD is not talking gloom and doom. In fact MD Russel 'One L' Creedy bought up big last month to the tune of 50,000 shares.

At 60c per share, the price I bought at today, and with an annual dividend payment of 6cps, this equates to a gross dividend yield of 15%. With the reserve bank indicative rate tipped to fall to 5.5% next week that income gap is in my judgement starting to become irresistable to the income investor.

I don't often make specific predictions. But I think the RBD price will hit 80c before this summer ends.

SNOOPY

discl: hold RBD

[Dr_Who]

Hey Snoopy, do you think the div is sustainable for the next 2 years?

Are you gonna file a SSH soon? LOL

[duncan macgregor]

I'd still say a rise of under 2% is just as likely to be noise than anything significant



I'm not so sure RBD ever *has* traded with the rest of the market!

Both Phaedrus and Macdunk have pointed out to me several times that RBD didn't really take part in the market rally over the last two years. Largely I suspect because the market decided it was a 'zero growth' share. That is the negative way to look at RBD.

On the positive side a 'zero growth' share will not go down in price either, unless the outlook for the business deteriorates significantly. Management forecasts 'steady as she goes', and so sails the share price - even in a falling market.

SNOOPY

SNOOPY a little extract to remind you of the risk you take chasing dividends ignoring the downtrending share price. I think the share price was double what it is today when you wrote that. Macdunk

[Snoopy]

Hey Snoopy, do you think the div is sustainable for the next 2 years?

There may be some more write downs in goodwill associated with Pizza Hut. But these will be 'non cash writedowns' and will not affect the ability of RBD to pay dividends from their ongoing business. So yes, I think the dividend payments are sustainable.

Helpful to the industry, I think, will be new PM John Key's decision to cancel the traditional 'Christmas at Bellamys' in favour of pizza and beer on the parliamentary front grounds. Granted there is no guarantee he will buy those pizzas from Pizza Hut. But you can imagine the headlines if he goes to the opposition? "Key goes to Hell" or "Dominos descend on Key" would both be PR nightmares! So who do you think has the necessary production capacity in Wellington to fulfill such a bulk pizza order?

All in all, I think this will be a very astute PR exercise by Key - as well as having obvious flow ons for Pizza Hut. It will be a very public way to show Key's support for the private sector, while empasising his status as 'a man of the people'. Criticisim from the opposition? Contacts have told me that a number of former cabinet Labour Ministers are looking at supplementing their now reduced salaires with other income. Both David Benson Pope and would you believe Michael Cullen are in negotiation to 'take private' two Pizza Hut outlets in Dunedin. In the case of Cullen, still being a list MP, it would be a simple matter to convert his former electorial office into a PH delco as the paint is the right colour already!

All this means that Key's prospective 'end of year bash' is unlikely to be criticised by the Labour party. Even the Greens won't be able to say much because RBD is a fully NZ owned company (in line with 'buy kiwi made') and the boxes the pizzas come in will be fully recyclable!

SNOOPY

discl: hold RBD, LNN

[BRICKS]

EVEN though 7 stores where closed the turnover and sales up 8%. Love that KFC,
still growing all except the share price but the Dividends are SAFE cant say that
for to many other NZ companies..

[Dr_Who]

Good work.

I see McDs is doing very well in the US with revenues up. I guess everyone is going for fast and cheap food in a recession.

[Deev8]

EVEN though 7 stores where closed the turnover and sales up 8%.

I think that sales were up 0.8% rather than 8% - that's still up, but not quite as impressive.

Restaurant Brands Third Quarter Sales Announcement says
Restaurant Brands’ total sales across the company’s three brands for the third quarter (12 weeks ended 1 December 2008) were $69.6 million, an increase of 0.8% on the equivalent period last year.

[BRICKS]

I think that sales were up 0.8% rather than 8% - that's still up, but not quite as impressive.

Restaurant Brands Third Quarter Sales Announcement says
Restaurant Brands’ total sales across the company’s three brands for the third quarter (12 weeks ended 1 December 2008) were $69.6 million, an increase of 0.8% on the equivalent period last year.

STILL up and making Money..

[minimoke]

I think that sales were up 0.8% rather than 8% - that's still up, but not quite as impressive.

September quarter inflation running at 5.1% and they increased $ sales by 0.8% suggesting volume is down and profits likely to follow. The sales figures are probably the good news.