Wednesday, August 3, 2011

Collins Foods IPO

Lets jump across the ditch for a while to look at the impending IPO of Collins Foods, the franchisee of YUM! Brands Inc [YUM]that operates the 119 store KFC chain in Queensland and the 85 unit Sizzler business.

The best way to compare the merits or otherwise of this IPO is to make a comparison with the NZ franchisee of KFC, Pizza Hut and Starbucks in New Zealand, Restaurant Brands Ltd [RBD.NZX].

The latest figures that we have for Collins Foods is in their prospectus and for Restaurant Brands their 2011 Annual Report, although we will look at the 1998 Annual Report for RBD to get a comparison between the two companies at the time of their respective IPOs.

Not all figures and ratios are available for Collins Foods.

The Stats

Restaurant Brands - Compiled from 1998 & 2011 Annual Reports



1997 2011
Net Profit 11.1 25.1
Sales
216.8 324.4
EPS
13.1 24.6
Net Debt
58 29.5
Net Cashflow 18.3 40.5
Store Numbers 124 208
NTA per share
37.4
PE Ratio

9.64
Market Cap
235
Div Yield

7.08
Net Margin
7.48

* Figures in NZ dollars


Collins Foods - Compiled from 2011 Prospectus



1997 2011
Net Profit
22.8
Sales

410.8
EPS



Net Debt - Proforma 123.7
Net Debt - Audited
228
Net Cashflow
15.4
Store Numbers
202
NTA per share


PE Ratio



Market Cap
232.5
Div Yield

6.4
Net Margin



*Figures in Australian dollars

The most interesting part of this IPO is that of the $232.5 million raised $105 million will be used to pay down the $228 million debt mountain that has accrued under the ownership of Pacific Equity Partners, so shareholders are basically paying back the banks by buying shares.

The RBD IPO had shares valued at $NZ 2.20 each with roughly a $200 million market cap, while the Collins Foods IPO has a $2.50 IPO share price with a market cap of around $AU230 million.

While the RBD IPO and subsequent performance of the company foundered for many years and failed to meet IPO expectations the company is now in relative health and has grown over the last 3-4 years.

Collins Foods is laden with debt and has had a very patchy last few years in terms of sales and profit.

When comparing the two companies one can clearly see the value in RBD over Collins Foods. Better profit on less sales, indicating far better margins and less debt on the books.

Investors would be far better off buying RBD shares than Collins Foods and it will be interesting to watch what happens across the tasman with Collins now that it is listed and RBD managment have indicated that they are still interested in expanding there given the right opportunities.

Avoid.

Collins Foods

Prospectus

Restaurant Brands @ Share Investor

KFC Doubles up on Double Down record one day sales
Share Price Alert: Restaurant Brands Ltd
Restaurant Brands share price looking overcooked
Most Outstanding Stock of 2010: Restaurant Brands Ltd
Restaurant Brands Ltd: KFC has finally cracked it
Restaurant Brands: KFC Sales Figures Explained - Part 2
Finger Lick'n Good Management
Chart of the Week: Restaurant Brands Ltd
Long Term View: Restaurant Brands Ltd
Stock of Week: Restaurant Brands Ltd
Restaurant Brands: Buy or Sell ?
Pizza Hut sell-off provide opportunities all-round
Danny Diab & Restaurant Brands
2008-2009 KFC sales figures mislead investors
KFC Finally Flying
Starbuck's New Zealand Cup doesn't runneth over
RBD gives KFC a push
McDonald's playing chicken with KFC
Restaurant Brand's Pizza Hut faces increasing competition
RBD sales analysis
RBD saga continues: CEO leaves
The secret recipe is out
2007 FY profit analysis
Delivering increased profit in October 2007
No reason for optimism in latest sales figures

Discuss RBD @ Share Investor Forum
Download RBD company reports


From Fishpond.co.nz - Every Bastard Says No: The 42 Below Story





c Share Investor 2011