RBD - Restaurant Brands

[KJ]

H2SO4-yes,of course I've heard about not selling in an uptrend.
Unlike you I believe that the market looks ahead in valuing a stock & in this regard next years profit
will have a big bearing.I note that the Directors feel that it will not be easy.
Sell when it reaches value-really-who determines this?The market decides what the value is.
I would certainly sell if it reaches $2.90 but can see little reason why the price will exceed the
previous high-hope I am wrong.

[gregrday]

Hi KJ

i previously posted an analysis of RBD, I haven't had time to update it with the latest figures, will post here when I do. The previous analysis is here:
http://gregnz.wordpress.com/2010/12/...brands-part-2/

Essentially it sees little to no growth, a reduction in capital expenditure and an ongoing free-cash-flow of around $21 million, which gives me a stock price of $3.59.
I also think that this is a relatively conservative estimate, with no factoring of improved sales due to the KFC refurbishment program.

something to think about!

cheers
Greg

[h2so4]

H2SO4-yes,of course I've heard about not selling in an uptrend.
Unlike you I believe that the market looks ahead in valuing a stock & in this regard next years profit
will have a big bearing.I note that the Directors feel that it will not be easy.
Sell when it reaches value-really-who determines this?The market decides what the value is.
I would certainly sell if it reaches $2.90 but can see little reason why the price will exceed the
previous high-hope I am wrong.

The market decides what the price is. Price is what you pay value is what you get.

[KJ]

The market decides what the price is. Price is what you pay value is what you get.

I would have thought that value is one person's estimate of what a share is worth based on a number of assumptions
which could be right or wrong.

[KJ]

For KJ it is ... no doubt using his average cost

There are some who have free RBD shares as well sulphuric man .... wonder how they calculate their dividend yield

Just to clarify Winner I have no free shares-not sure how you get free shares.

[KJ]

Hi KJ

i previously posted an analysis of RBD, I haven't had time to update it with the latest figures, will post here when I do. The previous analysis is here:
http://gregnz.wordpress.com/2010/12/...brands-part-2/

Essentially it sees little to no growth, a reduction in capital expenditure and an ongoing free-cash-flow of around $21 million, which gives me a stock price of $3.59.
I also think that this is a relatively conservative estimate, with no factoring of improved sales due to the KFC refurbishment program.

something to think about!

cheers
Greg

Thanks for pointing me to the analysis that you have done.I follow the arithmetic.Sentiment is probably keeping
RBD under your value estimate.I have learnt over the years not to ignore sentiment.I bought into RBD after a
period (Aussi Shambles) where investors had become overly fearful & the price rediculously low.
Thanks for your comments-lets hope we see $3.59 plus.

[winner69]

Just to clarify Winner I have no free shares-not sure how you get free shares.

No not you KJ ... it was somebody else who said their RBD shares were free .... like selling some for a profit and using the profit figure to reduce his overall cost to get somewhere newar zero ... hey presto free shares ... if you get what I mean

[Snoopy]

When to sell is often a hard decision I find & RBD is a prime example.A very high dividend yield (close to 20%) makes holding attractive but the stock has had such a good run in the last couple of years that you have to think that it will not last.What is likely to keep driving the price?
I find it hard to see profits continuing to climb.

Dividend yield is usually measured on market price. Looking historically last years payout was 17c (imputed). At a share price of $2.50 that gives a yield of 9.7% (assuming 30% tax rate). 9.7% very impressive when the bank quoted me 4% gross for a 6 month term deposit last week.

What will drive the RBD share price is the elimination of loss making outlets, achieved by either closing them or selling off to smaller family run operators to whom a corportae head office is just a drag on profits. Also the RWC should be good for pizza in general. And if RBD can sell off Starbucks as a going concern so much the better. After corporate head office costs are taken into account. Starbucks makes no money for RBD.

9.7% is well above the long term average NZX return. I would say by holding RBD with no profit growth forever into the future you should still outperform the NZX. From here I don't see anyone getting rich on RBD overnight, but I can't think of a single FA reason to sell now. Normal operating PE only around 10 with the share price of $2.50. RBD still looks ridiculously cheap compared to their retail listed peers.

SNOOPY

[Corporate]

Snoopy do you think that investors believe the dividend rate isn't maintainable and therefore the current yield could be seen as high?

[Snoopy]

Snoopy do you think that investors believe the dividend rate isn't maintainable and therefore the current yield could be seen as high?

I can't answer for the generic investor Corporate. However, the latest advisory to the stock exchange indicates that there are 97.8m RBD shares on issue. Operational profit was $25.1m for FY2011. So operational earnings per share were: $25.1m/$97.8m= 25.7cps. Since the dividend payout was only 17cps, earnings would have to decline by some 30% before that 17cps level of dividend payment became unsustainable. You have to ask yourself what is the chance of that?

RBD are using their retained earnings to pay down debt while times are good. I think this is a sound strategy and that we will see annual dividends of at least 17cps into the forseeable future.

SNOOPY

discl: hold RBD