Burgerfuel

[Halebop]

There is a lot of blue sky priced into the offer.

Burger Fuel own 1 store - probably loss making - in Sydney, 1 store in Auckland, a wholesale distribution business and the franchise rights. In the 9 months to December 2006 (Why are these results so old?) the company lost about $150,000, having made a small profit in NZ and lost a larger sum in Sydney while incurring setup costs over there.

Given the NZ profits are NZ$132k before tax for 9 months, the bulk of their earnings probably stem from the single original company owned store. Excluding up front franchise fees, their royalty stream is probably about $1m pa at the moment. That doesn't pay for a lot of overhead. With a fairly long operating history, I was however surprised at the paucity of financial data.

I was also suspicious of the low tax rate incurred on the NZ earnings - just 4.53% - which hints that either aren't profitable on an operational level or they have lost money in prior periods as well.

The sizzle comes from expectations of global success. They point out that just a small global penetration results in many stores (and we can surmise a lot of royalties although the prospectus is pretty light on hard data other than some specious what if conclusions).

If they have any sort of success, the $60m price tag the float assigns itself may be justified. I'd find it difficult to pay $60m for a company that is losing money, has an unproven international expansion policy and limited profit potential in their home market. I think the promoters got greedy with their pricing and would consider a price that values the company at half the offer more realistic.

Best wishes to the promoters and potential investors. It is nice to see a local company with ambitions. Too rich for me.

[warthog]

quote:Originally posted by BRICKS

quote:Originally posted by Sideshow Bob

quote:Originally posted by Scuffer

quote:Originally posted by Bling_Bling

Hey Scuffer, you are not too far from the truth with Bricks

I'm not having a go at him I just felt like i'm the new kid on the block and I patted a dog and it bit me but hey he is probably a nice guy and was having a bad day.

All Bricks post are like that

.....wait, however I do remember 1 post where he put a coherent English sentence together and it was non-abusive!

BOB, BOB your sideshow has been out of action for some time we know your been in jail for a holiday was it good, You must get back to your meat company going to stop killing and start milking the cows so good to hear from you REGARDS.. [8D]

The hog now believes that BRICKS and MacDunk are long lost siblings, separated at birth in a heart-wrenching twisted saga of lost love and lives unfulfilled. They both started out in similar lives but soon BRICKS gave away the chance at education and literacy settling instead for the complex and challenging life that is cleaning catch-tanks from fishing boats. MacDunk on the other hand went straight to the udder, as they say, and worked his way up to head share-milker, eventually cashing in his seven cows and marrying the ex-Carter Holt assistant tea-lady whom he initially got drunk on cheap wine in the hope of finding out what brand of biscuits Carters habitually bought for smoko breaks (his plan being to invest the bovine proceeds in a biscuit-producing operation). Now, the two siblings are bought together once more but this time life is quite different. Currently, no fewer than eight universities are vying for access to the pair to establish some coherent and conclusive position on the question of nature vs. nurture. How will it turn out? Did MacDunk invest in the right biscuit company, or did he put his bun in the wrong oven? Will BRICKS cement a solid relationship at last with MacDunk of memories old? We will just have to sit tight and wait to see ...

[CJ]

quote:Originally posted by Halebop

There is a lot of blue sky priced into the offer.
...

If they have any sort of success, the $60m price tag the float assigns itself may be justified. I'd find it difficult to pay $60m for a company that is losing money, has an unproven international expansion policy and limited profit potential in their home market. I think the promoters got greedy with their pricing and would consider a price that values the company at half the offer more realistic.

Similar things were said about 42below??

Not sure about expansion into Europe either. GBK (the UK copy of the NZ store) was bought for £10m a few years ago (about 8-10 stores) and the new owners want to expand in UK and Europe (do a search on Gourment Burger Kitchen - they were in the Hearld in the past 2 weeks).

Selling burgers to the US? I think they probably have that base covered.

As far as NZ goes, there is lots of growth potential. Tauranga is about to open its second store and i think they have a few more opening before christmas.

once Sydney is established, there are plenty of options there as well.

[Halebop]

CJ there are a lot of "ifs" in there for $60m. The thing with Sydney is that it's not once established it's if profitably established.

I could imagine New Zealand easily supporting 40 or 50 stores but even if it were 100 stores (and that would take 5, 10 or more years) the royalty stream would perhaps be about $6m pa in today's dollars less overheads (currently around $3m with public company costs yet to be added). Hardly a reason to pay $60m now.

Taking a 10 year view and given a less than proven pedigree you'd probably want to earn returns of at least 15% per annum, then the business would have to be worth about $240m in 10 years time. If the market assigned a higher than normal average PE over that time - say 20 - the company would need to earn $12m after tax, about $17.1m before tax. Overhead would have to be substantially higher to support a pan-tasman infrastructure, much higher stores numbers and 10 years worth of inflation - say triple current overhead and add 35% for inflation - about $12.2m pa. (this compares well enough with ASX listed RFG, perhaps its on the light side allowing for inflation on top of the RFG numbers). So the company would need to gross $29.3m. If 20% of revenues were fee rather than royalty related, they would need to generate $23.44m from royalties, implying system sales of $390m, implying 250 to 300 stores (also allowing for 35% inflation in sales figures). That's a very demanding rate of store unit growth before factoring execution risk on top. ...I'm not saying they couldn't do it, just that the pricing doesn't reflect a harsher and pragmatic reality.

...But then it this appears to be a float targeted at burger lovers rather than investors. Maybe in 10 years times we'll have a bunch of aged 20 something "Burger" millionaires...

[BRICKS]

The hog now believes that BRICKS and MacDunk are long lost siblings, separated at birth in a heart-wrenching twisted saga of lost love and lives unfulfilled. They both started out in similar lives but soon BRICKS gave away the chance at education and literacy settling instead for the complex and challenging life that is cleaning catch-tanks from fishing boats. MacDunk on the other hand went straight to the udder, as they say, and worked his way up to head share-milker, eventually cashing in his seven cows and marrying the ex-Carter Holt assistant tea-lady whom he initially got drunk on cheap wine in the hope of finding out what brand of biscuits Carters habitually bought for smoko breaks (his plan being to invest the bovine proceeds in a biscuit-producing operation). Now, the two siblings are bought together once more but this time life is quite different. Currently, no fewer than eight universities are vying for access to the pair to establish some coherent and conclusive position on the question of nature vs. nurture. How will it turn out? Did MacDunk invest in the right biscuit company, or did he put his bun in the wrong oven? Will BRICKS cement a solid relationship at last with MacDunk of memories old? We will just have to sit tight and wait to see ...
[/quote]

WELL there is one thing for sure is that BRICKS will not have a relationship with THE HOG because he has had his nose up his REAR so long now that he cant tell BLACK from WHITE and we don't have to sit tight to SEE.. [8D]

[Bling_Bling]

I rather put my money with RBD with the SP at these levels. AT least RBD has a div and are under valued. Burger is too much risk at $60 M. I still cant believe they valued it at $60 M ..LOL

[Scuffer]

Honestly can anyone see this as more than a pipe dream, but aim for the stars good luck to them.

[CJ]

quote:Originally posted by Halebop

CJ there are a lot of "ifs" in there for $60m. The thing with Sydney is that it's not once established it's if profitably established.

I never said it was a good investment and have said that to others as well.

I beleive the "dream" is similar to 42 below but I dont think that they will get the global penitration to have the same result.

I beleive any money they use to go to the USA or Europe (especially UK - GBK will have 150 stores in under 5 years here) will be more than a waste of money, it will be a cashflow drag.

However, their burgers are still good and I think that is the way i will be supporting them (ie. by eating rather than investing).

[clearasmud]

Good burgers ay.
I'll give them a go.
As for the shares ha ha

[John]

I find it real interesting to see their "valuation" of the co and I think I even heard someone from BF making ref to the 42below story. i.e. we are going to build this up as much as we can with loads of hot air before selling to some large corporate....