RBD - Restaurant Brands

[Deev8]

Restaurant Brands reported improved half-year results this morning:

- NPAT on continuing operations (excluding non trading items) for the half year was $5.4 million. Up 12% on the $4.9 million achieved for the prior year comparable period.

- NPAT including non trading items was $4.5 million, up $4.3 million on prior year. The prior year included a write down of the Pizza Hut Victoria investment.

- Total revenues from continuing operations (New Zealand) for the first half were $164.3 million, up $7.9 million or 5.1% on prior year.

- Interim dividend of 3.0 cents per share, fully imputed. A 20% increase on the 2.5 cent dividend paid last year, recognising improved trading conditions and cash flow.

Full results announcement

[Dr_Who]

Nice result. Lets hope they can keep up the momentum.

[BRICKS]

ANOTHER good report KFC up 8% so Mr Chips will be up 8% as MCH. sends 50% production of chips now goes to Australia the company now does not have rely on RBD that much as in the past, Good on the customers for eating well don't worry all pizza will soon be GONE..

[Scuffer]

There is a war in the high streets and suburban shopping centres of NZ, as pizza chains jostle for market position, the big boys will win in the end the smaller private pizza chains will slowly fall by the wayside, the cut price deals at some are so cheap you have to wonder if they are trying to buy the publics custom, I personally know of one small pizza shop offering a deal on a large pizza for $3, this sort of trading cannot last, there will be shops closing.

[BRICKS]

DO you buy any at $3 as I don't like them any price is dear, But look at this way RBD just closed down 7 Pizza Red roof huts in the last Quarter well that puts 70 - 80 people out of work our company doing its bit for the unemployed...

[Snoopy]

Restaurant Brands reported improved half-year results this morning:

- NPAT on continuing operations (excluding non trading items) for the half year was $5.4 million. Up 12% on the $4.9 million achieved for the prior year comparable period.

- Total revenues from continuing operations (New Zealand) for the first half were $164.3 million, up $7.9 million or 5.1% on prior year.

- Interim dividend of 3.0 cents per share, fully imputed. A 20% increase on the 2.5 cent dividend paid last year, recognising improved trading conditions and cash flow.

I got back from my Christmas break finding that RBD had hit my 'stop buy'. So I am now the proud owner of more RBD shares, bought at 87c. I can't remember exactly when I put the order in. It was probably a couple of months ago. I guess it just shows that 'price favours the patient'.

In a nutshell KFC is doing better than expected, and the threatening Ozzie invader 'Red Rooster' has been confined to a couple of 'hen runs' in Auckland.

Starbucks is doing OK, and I reckon it is now marginally profitable even including the head office cost allocation millstone. However Starbuck's main purpose seems to be to provide new director Sue Suckling with something to do and keep her away from meddling (sic) with the old boys network controlling KFC and Pizza Hut, rather than to earn any serious money for shareholders. Personally I think Starbucks should be sold back to the master franchisor. That would release enough cash to pay down some of that RBD debt, without affecting overall profit much, and allow management to focus more on the real problems the company faces.

Pizza Hut is getting smaller but not at a rate fast enough to compensate for the shrinking profitability of the pizza market. They are losing money and remain the problem area for the company. I really wanted to see PH turn before I invested more. But progress in the other divisions has outstripped my expectations, which is why I put my 'buy' order in - at the right price.

SNOOPY

discl: Hold RBD, average entry price now $1.23

[duncan macgregor]

Please all rise for this session of the Sharechat internet court, Judge Mick 100 presiding.

The defendent, Snoopy, is here to answer the following question

"Before you decide to hold or buy more shares in a company whose shareprice is plumetting in value - eg, restarant brands
Ask your self this question:"

"Is there a possibility that my decision making process is being affected by 'escaslation of commitment'?"

"So how about it Snoopy? Are you suffering from escalation of commitment?"

---------

A fair question Judge Mick. Now please allow me to present my evidence.

I am a foundation shareholder of RBD. I acquired my first shares in June 1997 at an effective $2.03. In March 1998 I purchased some more at an equivalent price of $1.29. I have made several purchases in subsequent periods, priced as follows: September 1998 62c (equivalent), February 2000 $1.20 (equivalent) and another batch at $1.18 (equivalent). More purchases were made in September 2000 at $1.14, March 2002 at $2.08, July 2002 at $1.71, September 2003 at $1.25, September 2004 at $1.26, December 2004 at $1.26, March 2005 at $1.29, July 2005 at $1.60, October 2005 at $1.30 and finally later in that same month at $1.24. My weighted average purchase price is $1.26. My weighted average share holding time is 2.5 years. (That's because most of my holding has been bought in the last couple of years, during the time RBD has suffered from the most derision on this forum.)

Based on a market price of $1.33 I have made an average capital gain of 2.5cps per year held. The current net yield is 10cps, or 12.5cps if we add the annualised capital gain. That gives a gross yield annual return of 13.8%. Now, I'm not going to claim that is a fantastic return, although it is double what you would earn in the bank. But I do see that return as more than satisfactory, given the conservative nature of the underlying investment.

Some people see successful investment, in the cricket analogy, as a process of hitting as many sixes as you can. Personally I prefer a technique which gets less headlines but over the long term can be just as rewarding if not more so (because you are taking less risks). I refer to the 'pushing for singles' method. Just go about your job quietly clocking up the runs and keeping the scoreboard ticking over.

Being an investor in RBD won't score you many bonus swoons at cocktail parties. But it's a great investment to put your mother into. That's because my quoted returns are IMO, quite sustainable - even if the business doesn't grow at all! That's why RBD should be a core holding of any income based portfolio. For this whole century, RBD has had a consistent dividend income record that puts *all* the listed property trusts to shame.

As for the 'plummeting share price', there has been no long term plummet since 1998, since the inital fall from grace after the IPO. The share price today is more or less what it was in 1998. Since RBD have paid out nearly all of their profits as dividends since then, this is to be expected.

The case for investment, since 1998 has always been based on dividend yield. Investing in this company from a dividend perspective makes as much sense in 2006 as it did in 1998 and virtually every year in between. Therefore I reject the 'escalation of commitment' argument. If you look at 'new' investment in RBD in 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005 and 2006 it has made huge sense every year, for eight different annually discrete reasons.

RBD, highly profitable, highly reliable and proven as a sound investment for every year of this century. Judge Mick, I rest my case.

SNOOPY

discl: hold RBD, and very satisfied with the investment performance.

A reminder from the past SNOOPY of your determination to commit financial suicide.

[Snoopy]

A reminder from the past SNOOPY of your determination to commit financial suicide.

I just knew I would cajoule you into replying Macca. I expected one of your usual raving responses though, not that you would turn my own words against me! I think you are getting better at this. Anyway it's a fair call.

I did some retro-arithmetic on the case I presented to 'Judge Mick'. It looks like the average share price I paid was $1.36 in October 2005, not the $1.26 I stated at the time. Not sure if it was just a typo but it does make sense that I have reduced my average purchase price by more than 3cps, given all the 'sub dollar' purchasing I have done since 2005.

You think I am on the road to oblivion with RBD? I have been giving other retailers the 'once over', in particular STU, HLG and MHI, to see if I should 'cut my losses' and switch. While all of those companies are IMO better companies than RBD, they are not compellingly better value. So I have decided to 'stay put' and add to my position in RBD - in a measured way of course. And thanks to 'value averaging' the lower the share price goes, the more shares I can buy for my dollar.

I am not quite sure why I bothered to work out my average buy price into RBD. Probably because you think it is important and I think it is important to present a 'warts and all' picture. However all of my share purchases are 'future focussed' and 'portfolio balancing focussed'.

I wanted more shares in retail and I still think it is worth 'hanging in there' with RBD for the recovery potential. I admit to having a bias for investing in firms dealing in food because people have to buy food no matter what the state of the economy. In a 'down market' today, RBD was up nearly 2.5%. That is the kind of performance I am after.

SNOOPY

discl: hold RBD

[duncan macgregor]

Snoopy i see you were the only investor to select RBD in the share investor contest along with TUA. GOOD LUCK MATE YOU CERTAINLY NEED IT. Macdunk

[Snoopy]

Snoopy i see you were the only investor to select RBD in the share investor contest along with TUA. GOOD LUCK MATE YOU CERTAINLY NEED IT. Macdunk

I am much more interested in what the professional investors are doing with RBD than what is popular Macdunk. Like for instance director Danny Diab who as at 27th November 2007 held 4,000,000 (4m) RBD shares.

4m shares is up from the 3.444m shares he held as at 1st April 2007. Going back through the shareholder reports we find Danny's holding was 3.444m shares on 9th March 2006, 3.444m shares as at 31st March 2005, 3.444m shares as at 29th February 2004, 3.312m shares as at 28th February 2003, 3.100m shares as at 28th February 2002, 3.1m shares as at 31st December 2000, 2.5m shares as at 31st December 1999 and 2.0m shares on 21st January 1999. No holding was listed for Diab on 20th January 1998.

I can't say the exact days that Danny bought his shares. But if you regard the share price as at 30th September - somewhat near when the annual result came out - as 'indicative' it looks like Danny purchased his initial 2.0m holding where the share price was around 80c (September 1998).

The increase in shares held between December 1999 and December 2000 was 0.166m from the 1:12 bonus issue, leaving 0.333m to be purchased on market at the '30th September 1999 indicative price' of $1.30.

Danny increased his holding again by 0.6m shares at the '30th September 2000 indicative price' of $1.14 and a further 0.212m shares at the 'indicative price of 30th September 2002' of $1.72. This 2002-2003 period also corresponds to when Danny was appointed a director of the company and when RBD bought in to Pizza Hut Victoria, expecting great things. On the indicative date of 30th September 2003, Danny bought 0.132m shares at $1.25.

Danny has made no more purchases of shares until the last few months. Over that time he has increased his holding by 0.556m shares at the 30th September 2007 indicative price of 87c. Let me just repeat that point in case you didn't get it. Danny has made *no purchases of RBD shares for around four years* (all the time that RBD was expanding into Australia).

I estimate Danny's holding price for RBD shares as follows:

2,000,000 x $0.80 = $1,600,000
166,000 x 0 = $ 0
333,000 x $1.30 = $432,900
600,000 x $1.14 = $684,000
212,000 x $1.72 = $364,640
132,000 x $1.25 = $165,000
556,000 x $0.87= $483,720

I calculate from that an estimated average entry price of 93cps.

No doubt you Macdunk will claim that Danny is a fool and has 'lost money', completely ignoring all the dividends he has scooped up along the way. But even accepting the worst of your misconceptions as fact, I think you would have to be impressed by the timing of Danny's entry points to increase his position in RBD. He hasn't always got it right, but I don't think there are many shareholders around with an average entry price as low as what he has achieved.

I am putting my cash on the line that Danny, complete with his insider knowledge of the industry, has 'done it again' and that around now is the best time to invest in RBD since 2003. Or put another way it is absolutely the worst time to sell out, as you would have me do.

SNOOPY

discl: hold RBD