Thursday, August 2, 2007

Burger Fuel's Daytime Drama

In the daytime soap opera that is the recent Burger Fuel(BFW)IPO, its first week as a listed company would have had it cancelled after its first episode.

After 5 days less than $NZ 10000.00 of stock has changed hands. In one day it was the NZX's biggest loser, the share price dropped 20% to 80c , on turnover of less than $1000.00. The very next day the show was resurrected, it was the NZ Share Market's biggest gainer, moving 25% to the previous high of one Kiwi Dollar-incidentally its listing price.

This moved the company Chairman to make a media comment:

"Company chairman Peter Brook said not much could be read into the share price change because there was very little liquidity in the stock.

"There are just not the shares out there to buy. I think if you wanted to buy 30,000 or 35,000 you would be paying $1.20 per share," he said".

Post listing media briefings from Burger Fuel have been strangely episodic when compared to life before the Burger Fuel listing and media circus kicked off but Brook was retrained in his comments. I mean fancy saying this "...not much could be read into the share price change...". Actually unless you have the mute button on with your back to the big picture I think the combo of the share price drop and low liquidity is telling us lots. Simply that the IPO was overpriced and the market has little confidence in Burger Fuel's prospects.

Josef Roberts and his team now have to prove themselves to the market. They failed to convince at the IPO and this last week market viewers were not really tuning in.

Burger Fuel is today sitting at a share price of 1 dollar with no shares traded. This values the company at 60 Million Kiwi Dollars, only 30m odd dollars less than Restaurant Brands(RBD), the NZX's other Fast Food stock. Remember RBD have sales of 300m VS BFW's 16m odd but the Burger Fuel Company will get its income mostly from franchise fees of which were around 3.5m. Not delicious figures.

With less than a third of the capital originally hoped for Burger Fuel must now change their initial plans, expensively mapped out in the $1.5M prospectus, expanding with less haste and relying more on Franchisees to stump up capital to expand store numbers and promised "global reach". In itself probably a better model than their initial plan of the company using their own capital to open new stores then selling them off to Franchisees. One positive in the myriad of negatives that swirl around this company.

Keep watching, Burger Fuels stock will be in low rotation with re-runs of the same volatile share price and rare glimpses of its star players, its execs only venturing out when a positive spin is needed or indeed if there is actually the possibility of a 10 season run.

I have a feeling there might be a cancellation after the first 1 or 2.

c Share Investor 2007