RBD - Restaurant Brands

[Snoopy]

Snoopy. You do not get growth from closing stores. You may increase bottom line but you reduce your revenues.

Profit growth is what I am after Nita. I understand what you are saying about revenue growth. RBD press releases dwelt on revenue growth for years as their profit shrunk away.
There is a term for seeking (revenue) growth at any price. It is called 'the institutional imperative', beloved by managers who want to make their own jobs more important. Generally it is a successful mechanism for transferring wealth from long suffering shareholders to senior managers. I for one am glad that RBD have ceased to move down that path.

SNOOPY

[Snoopy]

60 to 70 cps seems about rght for this stock at the mo imo

Touched 70c today Nita, and closed steady at 69c. All in all not a bad performance with the market as a whole down some 50 odd points.

I guess some of you will be mystified as to what is happening, when there has been no obvious sudden improvement in the underlying business performance.

RBD debt at the half year (30th August) was $40.8m. We learn on page 53 of the FY2008 annual report that almost all the loans are at a floating interest rate (at balance date 9.22%) and that these arrangements are not up for renegotiation until 2010. That gives an annual interest bill of some $3.8m. But floating interst rates have dropped massively since 29th February 2008. So I am guessing that after tax the ongoing RBD profit has been lifted by $NZ1.8m because of interest falls alone. Of course not all of this will flow through immediately (FY ending 28th February 2009) because interest rates have been gradually falling throughout the year. But it does look very good for next year, with interest rates likely to stay at these lower levels. All else being equal, this interest rate decline alone will represent a 17% after tax profit rise for the company (based on RBD's declared normalised profit of $11m in FY2008).

Also come 31st August 2008, RBD completed their $35m store transformation project promises to YUM. I suspect the store transformations will continue, but they will be slower on RBD's terms, not YUM's. This all helps the cashflow.

Of course I am not picking a 17% profit rise for RBD for FY2009, because the interest savings will be offset by rising costs. But I do think there is a very good chance that they will at least hold their operating profit this year, and thre is an even better chance that dividends will not be cut going forward from here.

Even at 70c , this equates to a gross income yield of nearly 14%. With term deposit rates at the bank down to about 5%, this 14% yield is way, way too high, even given the business risks. So I'm sticking to my prediction of RBD getting to 80c by the end of the summer. The RBD share price was only 60c when I first made that prediction. So we already half way there.

SNOOPY

discl: hold RBD

[The BOWMAN]

SNOOPY, pretty valid point. Never thought about that myself.

[Snoopy]

60 to 70 cps seems about rght for this stock at the mo imo

AMP do not agree with you Nita. Their entire holding of 9.269m shares were sold on market today at the measly price of 57c. Is that an all time low? AMP have been holding since 2002 so have crystallized a multi million dollar loss here. The main cornerstone shareholder gone overnight has to be big news. Particularly so when last time they were involved in RBD, AMP did quite well - riding the price up from around 90c to $1.60 or so IIRC.

I guess the real question is, have AMP made another good call? Or is it the buyer of those shares that has got the bargain? I wonder who the buyer was? (no it wasn't me!)

SNOOPY

discl: hold RBD

[Dr_Who]

I am also interested to find out who the buyer is. Did it go to one buyer or was it a placement spread to lots of clients?

Maybe AMP pumped up the sp and got a broker to place the shares to their private client?

[BRICKS]

THIS is a position that a big move with 19 million RBD traded in the last two days there is
change just to about to happen and they got it cheep so who is out there surprise us
you never know could be that take over we all have talked about but its time like this it better on the inside than on the OUTER..

[Snoopy]

THIS is a position that a big move with 19 million RBD traded in the last two days there is change just to about to happen and they got it cheep so who is out there surprise us you never know could be that take over we all have talked about but its time like this it better on the inside than on the OUTER..

I agree Bricks in principle. But where do you get your 'shares traded' numbers from? I saw the 9.269m shares from AMP go through the market on Thursday as an 'off market' trade plus IIRC a few hundred thousand more (?). Then around 700,000 shares went through the market on Friday. That is around 10m shares traded - significant, very significant - but way short of the 19m shares you are claiming was traded. The difference is of course that 19m shares basically means a takeover offer is required, probably next week, under the NZ takeovers code (if all those shares went to one buyer). Whereas buying 10m shares does not trigger such an offer. Are you sure that your figures are right?

SNOOPY

[winner69]

And it doesn't look like the 9 million went to one purchaser as that would have triggered a SSH notice .... either for a new substantial shareholder or one increasing it shareholding by 1% or more

Unless not everything is disclosed .... and that wouldn't surprise me either

[BRICKS]

I agree Bricks in principle. But where do you get your 'shares traded' numbers from? I saw the 9.269m shares from AMP go through the market on Thursday as an 'off market' trade plus IIRC a few hundred thousand more (?). Then around 700,000 shares went through the market on Friday. That is around 10m shares traded - significant, very significant - but way short of the 19m shares you are claiming was traded. The difference is of course that 19m shares basically means a takeover offer is required, probably next week, under the NZ takeovers code (if all those shares went to one buyer). Whereas buying 10m shares does not trigger such an offer. Are you sure that your figures are right?

SNOOPY

SO the numbers who cares millions have traded that means change they only have to notify when they hit +5% and then not straight away don't worry it will come out in the washing 69 still looking on the outside..

[Snoopy]

And it doesn't look like the 9 million went to one purchaser as that would have triggered a SSH notice .... either for a new substantial shareholder or one increasing it shareholding by 1% or more

Unless not everything is disclosed .... and that wouldn't surprise me either

It is possible the near 10% shareholding has been split up. Personally I think it is more likely that the new substantial shareholder (if they exist) has not got around to notifying the market yet. As Bricks says they will have to notify the market 'in time'. Not sure what that time limit is until the NZX policing hounds are set on them. A month? Anyone know?

SNOOPY