RBD - Restaurant Brands

[Nitaa]

YET again another mouth full hear say and maybe bet the management are up to there necks trying to turn the biz around and if it was easy it would have been done long time ago but at lest Snoopy is coming up with hard facts and the next final will TELL..

bricks. i am happy to be proven wrong. i guess we all just see the facts differently.

I am also not implying that managment are not working hard to turn it around (or if i did say it, it is not what i meant). However the lack of positve signs indicate that mangament are having difficulity in finding a solution. Remember its a sunset stock and the light is fading. only my opinion of course.

[JMKC]

Snoopy, I stand by what I said about Pizza Hutt having no market power. Just because they once had the most market share/stores doesn't mean they have power. To quote a piece of the article mentioned by Limegreen above:

"Pizza Hut used to command the biggest slice of the market but has been in steady decline for a few years, slugged on one side by the popular iconoclastic Hell brand and on the other by the cheaper Domino's."

Pizza Hutt have ZERO competitive advantage. Their gourmet pizzas are not gourmet, Dominos undercuts them on the value side, raw material costs are rising, AND there is a general push away from fast food (albeit the last problem should be offset by general population growth).

The only time Pizza Hutt had any market power was when they were the only ones in the market. This has now well and truly changed.

If yield is what you're after, buy Telecom or Vector. At least you have some visibility over earnings. If you are in RBD for the corporate angle fine, but I could name a few I would rather be in ahead of it. I just don't think there is any material earnings upside over the next few years.

[BRICKS]

you are a funny KING BRICK but I would take W69s comments more seriously than yours as I know your track record - I would stop buying losing retailers if I were you too - RBD just another low margin loser

I see it tracking sideways for the whole 08 year around 75-90. Wheres the fun in that. Consolidation is where it is headed for at least 6 months, lets come back and chat same time next year.

trust me KING BRICK, come back when it breaks 90.

WITH 407 odd posts and living in Q you really know what goes on in NZ here you can buy a KFC stock on the NZ market but not in Australian market and just returned to AU where KFC is alive and well for the size of NZ in this country RBD is a BARGAIN,, so you don't see that along with all the other YAPPERS so that your`s and there`s PROBLEM..

[minimoke]

Hot and Tasty is back at KFC. That alone should add 2% to revenue.

I thought all their food was supposed to be hot and tasty. If its not then what is it?

[Nitaa]

I thought all their food was supposed to be hot and tasty. If its not then what is it?

Orginal. dont forget, kfc have a secret recipe.

Here are my 3 q's . What are KFC going to do to improve their revenueand margins>

What is Pizza Hutt USP?

What next for Starbucks? starbucks offer the most leverage.

Never liked RBD and perhaps that explains my bias away from this stock

[Steve]

I mean to say Hot and Spicy chicken... LOL. Have you guys tried Nandos hot grilled chicken? It is very nice!

Nandos haven't made it down south yet, but I intend totry it next time I'm up north...

[Snoopy]

Pizza takeaway market might be $177M in 2007 but did you note that 3 years prior in 2004 it was $77m --- the pizza market has grown 130% in those three years

However Pizza Hut sales didn't grow (Still about $80m and i didn't bother try to break it up into delcos etc) ............. MARKET UP 130% AND PIZZA HUT UP 0% MEANS A MASSIVE LOSS OF MARKET SHARE ......... competitors cleaning them out

Hardly what you would expect from a market leader is it ...... or are the numbers a load of ****

I can't vouch for the numbers Winner. But even if we accept they may not be the whole truth it would be hard to deny that Pizza Hut has lost a huge amount of market share. Everything else being equal you would have to conclude that it is company management that is not performing. And part of that 'non performance' may be tied up with the fact that globally Pizza Hut is no longer a 'hip' brand globally.

Nevertheless share price does not reflect 'market share'. Share price reflects overall profitability whether the business is shrinking, growing or static. If PH is currently static, with cost cutting just offsetting loss of market share that is a recipe for the 'Pizza Hut Share Price' to remain static, provided all growth expectations have been squeezed from the share price. At 80c I would argue they have. Of course you cannot invest in PH on its own. You have to take KFC and Starbucks and invest in the RBD 'package'. The picture for the overall package is far better than Pizza Hut considered on its own.

When I said Pizza Hut was 'market leader' I simple meant that no other pizza brand in the market has higher gross takings - nothing else. That is still true AFAIK.

SNOOPY

[Snoopy]

I would stop buying losing retailers if I were you too - RBD just another low margin loser

I see it tracking sideways for the whole 08 year around 75-90. Wheres the fun in that. Consolidation is where it is headed for at least 6 months, lets come back and chat same time next year.

trust me KING BRICK, come back when it breaks 90.

If I buy today at 80c and in a years time it is worth 90c then I have made a 12.5% return. Furthermore if I scoop up a 6c dividend along the way, my return jumps to 20% (after tax). That would be 'entertaining' enough for most people in today's market I would have thought!

I agree that retailers in general are going to face some headwinds. But being a contrarian that is exactly why I am interested in buying retailers - while everyone else thinks it is a bad idea and the prices are knocked down accordingly!

Now if we take a look at average margins over the last five years for a sample of five retailers, then RBD does not come out too well.

1/ HLG: (6.4+8.9+10.5+11.0+10.7)/5= 9.5%
2/ STU: (6.9+7.9+8.6+7.0+6.0)/5= 7.3%
3/ MHI: (4.6+5.8+6.1+5.1+6.0)/5= 5.5%
4/ RBD: (5.1+4.1+4.9+4.6+1.7)/5 = 3.5%
5/ SCY: (2.3+2.5+2.6+1.9+1.8)/5 = 2.2%

But you have to remember that food tends to be a 'low margin business'. If you look across to the other side of the tasman to Woolworths, Australasia's leading retailer, they currently have margins of 3%, a figure much improved from previous years that management are happy with. I don't think anyone would suggest that WOW (ASX) is a dog, which just goes to show you do not need high margins to be successful in the food retailing business.

Put in that light, I think there is now a convincing investment case for RBD which is why I bought some more at 80c on Friday.

SNOOPY

discl: hold RBD

[Snoopy]

Here are my 3 q's . What are KFC going to do to improve their revenue and margins?

KFC on its own revenue trends are as follows:

HY2008: $106.2m => $193.1m full year (my projection)
FY2007: $182.7m
FY2006: $171.8m
FY2005: $173.0m
FY2004: $171.12m
FY2003: $175.14m

Margins, after tax, for KFC on its own I have calculated as follows:

FY2007: $12.17m/$182.7m= 6.67%
FY2006: $13.22m/$171.8m= 7.67%
FY2005: $11.26m/$173.0m= 6.50%
FY2004: $9.65m/$171.12m= 5.64%
FY2003: $12.84m/$175.14m= 7.33%

These margins are actually very good for a food retail business, so IMO don't need improving.

There is enough evidence here for me to suggest that the 'KFC store transformation project' *is* working to increase revenues and maintain margins.

What is Pizza Hutt USP?

Pizza Hut do not have a 'unique selling point' any more than your Woolworths supermarket down the road does. What Pizza Hut offer is a known product of reasonable quality at a reasonable price. It is a classic middle of the road offering that doesn't seek to be anything pretentious. The mere fact that Pizza Hut have a bigger store footprint than any of their competitors means that they are on average located closer to their customers than the competition. Being a 'known quantity' 'close to your target market' is enough to be a serious market player. Pizza Hut don't need to strive for the extremes, just as your Woolworths supermarket doesn't.

What next for Starbucks? Starbucks offer the most leverage.

Starbucks number of stores and after tax profitability is as follows by my estimation:

FY2007: 47stores, -$0.68m
FY2006: 44 stores, -$0.05m
FY2005: 39 stores, $0.65m
FY2004: 35 stores, $0.29m
FY2003: 35 stores, $0.13m

With that kind of 'leverage' I would like to see RBD stop the distraction, sell the chain and get back to sorting out their core PH and KFC business. The money from a Starbucks sale would go a long way towards eliminating company debt too, further boosting profitability.

SNOOPY

discl: hold RBD

[Nitaa]

If I buy today at 80c and in a years time it is worth 90c then I have made a 12.5% return. Furthermore if I scoop up a 6c dividend along the way, my return jumps to 20% (after tax). That would be 'entertaining' enough for most people in today's market I would have thought!

SNOOPY

discl: hold RBD

What you are talking about is IF. Do you reasonably expect RBD to return 6 cps in divvy this year? Yoy again talk about iIF. IF the sp rose to 90 cps in 12 months you have a reasonable case. IF it stays stagnant or drops you are in the poop again.

Your arguments are now based on hope and without fundamentals.
IF you can guarentee me those figures I WOULD JUMP IN IMMEDIATELY.