Burgerfuel: Dubai Marketing Hype!!!

Many of my readers will be aware that I have followed BurgerFuel Worldwide [BFW.NZ] since its listing in June 2007 and if you have then you will also be aware that I have been a vocal critic of the way the company was brought to the market and the way they have done business and treated their shareholders.

The opening of a store in Dubai yesterday continued the tradition of the company over-promising and under-delivering:

"People from all over the world will now get to experience the BurgerFuel culture and food and this will lead to many opportunities for us. In many ways this represents the beginning of our international journey". Josef Roberts, CEO BFW July 2010

The company plans to expand rapidly in Australia - having 100 outlets within five years - and then move into Britain and the United States. Josef Roberts Director BFW May 2007

BurgerFuel founder, Chris Mason, says this store represents a foundation stone for the company's overseas development and its high-traffic location will not just generate interest in the brand in Australia, but further afield as well.

"Kings Cross is very much a tourist Mecca, so this new store will be a showroom for our brand and the BurgerFuel formula."

"The Australian market poses some challenges for us, but the growing sales and great response from the locals to our Newtown store, which opened last December, shows there is a market for us across the Tasman." Chris Mason, BurgerFuel founder, October 2007.

Perhaps company expansion in Dubai will be different to promises of expansion in New Zealand, Australia and other parts of the world that have been, thus far, utter failures.

Prospectus promises of such growth were shouted from the rooftops and this is where the company value put on the IPO was calculated from. The market of course has decided that the company is worth way less than half of the IPO value and I think that is overstating things by half.

The company just simply has to deliver on promises made or face the wrath of the market and negative bastards like me.

The Dubai flourish is just repeating the same old lame marketing formula that may be good way to sell burgers but just doesn't fit with running a business listed on the stockmarket.

Better to under-promise and over-deliver, like they do with their Franchisee's food.


Burger Fuel Worldwide @ Share Investor


Burger Fuel 2010 Full Year Profit Analysis
Burger Fuel 2010 Full Year Profit Preview
Burger Fuel Worldwide: 2009 Half Year profit analysis
Stock of the Week: Burger Fuel Worldwide
Download full company analysis from Thomson First-Call
Burger Fuel doesn't rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss BFW @ Share Investor Forum - Register free




c Share Investor 2010

Burger Fuel 2010 Full Year Profit Analysis

I pointed out last week that Burger Fuel Worldwide [BFW.NZ] 2010 full year profit should be better than the 2009 result because of the surge in the growth of the fast food sector over the last couple of years and they have done better, with a narrower loss of just over half a million.

The vast bulk of revenue for this franchising company still comes via direct sales from company owned stores rather than royalties from franchisees but these royalties should rise as the company expands in the Middle East where it has done exceptionally well.

In New Zealand same stores sales for franchisee/company owned stores increased by just over 5%. When a new store in Mission Bay is included this increase amounts to over 12%. A good result but on a par with the likes of Restaurant Brands Ltd [RBD.NZ] which increased sales in the 2010 year by just under 5% (see 2010 Annual report for details)

No stores were opened in New Zealand during 2010 and it appears saturation point may have been reached with 27 stores a reasonable number given the size of the premium end of the fast food market that BFW operates in.

A big worry for Burger Fuel management will be its two beach-head stores in Sydney, Australia one of which is situated in Kings Cross.

There was much fanfare about the Kings Cross store being a hugely visible entry into OZ, with big expansion plans, with an emphasis by management on the marketing possibilities that the high exposure site had for foreign visitors to the "Cross" spreading the Burger Fuel word on a global scale.

Well that hasn't happened and as I pointed out in 2007 the store operating costs would be a huge burden on sustainable profitability and that, unfortunately, has turned out to be the case.

Looking at the 2011 year the company is set to grow in the Middle East but just get by in New Zealand.

Australia will be a big burden on such a small company and management will need to focus on costs or consider picking up sticks across the ditch. There is more and slicker competition in the gourmet burger business in Sydney than back on home turf.

Expansion of the company will be further hamstrung by its ever decreasing cash in the bank and as management have said they are relying on expansion of units rather than same store sales to get to profitability.

Shareholders can only hope.


Key Points from BFW 2010 Full Year

1. $552,983 loss - 22% better than last year.

2. $8,722,000 up 17% on 2009

3. Cash reserves down 25% to 1,159,000

4. Earnings per share -1.04c VS -$1.34 last year

5. 2 new stores in Dubai & Saudi Arabia doing well.

6. Australia failing to fire and with significant overheads mounting.

7. 210,000 shares issued to directors during the year.


Burger Fuel Worldwide @ Share Investor

Burger Fuel 2010 Full Year Profit Preview
Burger Fuel Worldwide: 2009 Half Year profit analysis
Stock of the Week: Burger Fuel Worldwide
Download full company analysis from Thomson First-Call
Burger Fuel doesn't rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss BFW @ Share Investor Forum - Register free




c Share Investor 2010

Burger Fuel 2010 Full Year Profit Preview

Burger Fuel Worldwide [BFW.NZ] should be releasing its 2010 full year results soon, if not this week and BFW investors and the market as a whole will be looking for a vast improvement on the 2009 result.

A $700,000.00 loss on revenue of $8 million for last year should be pared back markedly given the fortunes of other fast food companies operating in New Zealand. McDonalds, Restaurant Brands Ltd [RBD.NZ], Subway and a whole host of other quick service restaurant icons have done well during the current recession as consumers have moved downmarket from eating out at more expensive food offers as wallets and budgets have been squeezed.

Look though for an impact on the bottomline because of expansion costs in the Middle East and a subsequent evaporation of cash in the bank as a result.

More capital could be needed for any further significant expansion and the 2007 prospectus indicated that most of the growth would come from growing store numbers rather than sales per unit.

BFW gets its revenue from a percentage cut (around 8%) of sales per store and on current form the company would need to at least double revenue from the current $8 million to start making a decent profit in the low seven figure range.

That sort of result depends on opening more stores and that means more capital needed to expand, even though it is a franchisee/franchisor model.

The company is coming up to its 3 year anniversary of being listed on the NZAX board and has yet to turn a profit or show any of the overwhelmingly positive promise for results that management shouted from the rooftops pre IPO.

The 2010 result will show us whether the company is closer to achieving that and it will give investors an opportunity to compare 3 years of financials to help get a more accurate view as to whether BFW is moving in that direction or in fact has the potential to do that sometime in the future.

BFW shares are currently priced at 39c and are rarely traded.


Footnote  BFW are releasing their 2010 full year results Monday 14 June.



Burger Fuel Worldwide @ Share Investor


Burger Fuel Worldwide: 2009 Half Year profit analysis
Stock of the Week: Burger Fuel Worldwide
Download full company analysis from Thomson First-Call
Burger Fuel doesn't rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss BFW @ Share Investor Forum - Register free



c Share Investor 2010

Burger Fuel Worldwide: Download full company analysis from Thomson First-Call

If you want to see how the Burger Fuel Worldwide [BFW.NZ] financial's stack up I have included a full collection of data out June 19, 2009 courtesy of Thomson Financial First Call Global/ASB Securities.

You will find balance sheets, ratios, charts, shareholder returns and all the Burger Fuel info you could poke a hot chip at. (see teaser below but download the full package at Share Investor Forum - you must join to download. It is free and takes less than a minute. I might do this for other companies if there is sufficient interest.

I only mention this because the company is getting close to my purchase price. Last sold at 32c and the next bid in at 10c (a low for the company) with one optimistic fellow offering 1c per share for 100,000 shares!

Key Measures for Burger Fuel Worldwide Value N/R Risk 2 Lower risk Growth N/R Income 5 Lowest VALUE Company Market Sector Aspect Earnings Model -- 0.89 0.88 P/E ratio -- 7.44 12.0 P/B ratio 4.38 0.85 1.68 P/E Growth Ratio -- 1.68 1.67 P/S Ratio 2.18 1.64 0.39 INCOME Company Market Sector Dividend Yield -- 7.7% 5.2% Franking -- -- -- Tax adj Dividend Yield -- 5.6% 4.1% Dividend Stability 0.0% 0.0% 89.3% RISK Company Market Sector Beta 0.67 0.98 0.74 Current Ratio 3.13 3.85 1.09 Quick Ratio 2.86 3.12 0.39 Earnings Stability -- 54.5% 53.7% Debt/Equity ratio 3.6% 0.0% 50.5% Interest coverage (x) -42.8 4.49 2.28 GROWTH RATES 10yr 5yr 1yr 2yr Fcst Sales -- -- 76.1% -- Cash Flow -- -- 52.6% -- Earnings -- -- 66.8% -- Dividends -- -- -- -- Book Value -- -- -16.4% -- Previous Close 52 week high 52 week low $0.32 $0.64 $0.20 P/E Ratio -- Sector Food & Staples Retailing Market Cap $17.0 Million Key Dates Listed 27/07/2007 Balance Date 31 March AGM -- Total Shareholder Return (avg annual rate) 1yr 3yr 5yr 10yr -20.0% -- -- -- Earnings and Dividends Forecast (cents per share) Curr -- -- EPS -1.3 -- -- PE(x) -- -- -- DPS 0.0 -- -- Yield(%) -- -- -- Source: Thomson First Call Global Estimates

Burger Fuel Worldwide @ Share Investor


Burger Fuel doesn't rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss this Topic @ Share Investor Forum




c Share Investor 2009

Burger Fuel doesn't rule out capital raising

I took a look at the Burger Fuel Worldwide [BFW.NZ] profit for the Full Year to 31 March 2009 last week and one of the concerns for me was that the cash position was more than halved over the year to just over NZ$1.5 million.

Chris Mason, Burger Fuel CEO noted in the release in the "BFW Outlook" part of the document that:

The board of directors have advised that the BFW strategy remains consistent with the previous year. The group is focused on three main areas:

1) Continued growth of the total system sales in NZ, by way of increased store sales as well as an increased number of stores. However, the board is mindful of the current economic climate.

2) Continuing to build up trading in both Australian stores to ensure future profitable expansion can ultimately occur in Australia.

3) Negotiating Area Development or Master Franchise agreements in other identified countries to earn royalties and other revenue by licensing the BurgerFuel system.

Given the global and local economic situation, a key focus has been on reducing costs to ensure that the group can preserve cash and eventually reach profitability. In the last six months to 31 March 2009 the company was close to breaking even. Costs will continue to be managed in accordance with board policy, however further losses are expected in the 6 months to 30 September 2009, due to the requirement to support international markets and also continue to expand NZ. Chris Mason, Burger Fuel CEO.

With cost cutting and wise capital management a primary issue for BF management, I thought a few questions to Josef Roberts, a Burger Fuel Executive director, were warranted, concerning the subject of dwindling cash reserves and the possibility that extra capital could be warranted to continue IPO flagged expansion.


I had the following brief email exchange with Josef on the topic of capital raising.


Share Investor  Could BF investors learn how the company will expand as cash reserves are half what they were last year and getting very low as of 31/3/09.

Will the company have to borrow or ask for money from shareholders to grow?

Josef Roberts  As you aware I am not in a position to answer any questions like that. These are matters for public announcement if and when deemed appropriate by the board of directors.

S.I. That is fair enough but can you tell shareholders what expectations there are for growth given the rapidly dwindling cash position of BFW and therefore the possibility of a halt because of capital restraints?

J.R. Darren – like many company’s right now capital is scarce. We are no different and lack of capital affects growth – that’s for real, however, we have no debt and as you can see by our losses over the last 6 months, we can stem these by reducing investment. We would like more capital – of course we would – and it is certainly on our radar, we always wanted to raise $15M and we know that additional capital would speed up results. However, there are ways we can still grow on less capital and that’s what we are focusing on for now.

S.I. I am sure shareholders wouldn't mind investing more if there was a rights issue or some such capital raising. Now is a good opportunity to expand given cheaper leases and real estate costs.

J.R. You are right for sure – now is the time to invest in expansion. I will be sure to let you know if we decide to look at a capital raise and if this was done at a good price - well maybe we would get the uptake. Anyway - as I say these things are on the radar Darren.


Take it as you may readers but Josef is dead right, his company is in a position that many others are in and that some have faced already.

In my own portfolio for example 4 of my companies have already raised a total of more than $NZ 600 million in new capital and I have participated in 3 of them (1 2 3) to the tune of $7000.00.

Burger Fuel is no different.


Burger Fuel Worldwide @ Share Investor


Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss this Topic @ Share Investor Forum



c Share Investor 2009

Analysis - Burger Fuel Worldwide: FY profit to 31/03/09

Burger Fuel Worldwide [BFW.NZ] had their profit for the year to 31 March 2009 out today and I expected a poor performance but on the surface it looks like things are getting better. It is difficult to compare this years result to last years as operations for 2008 are for less than 12 months of operations.

Lets have a look at the results in a bit more detail.



Key Points

1. Revenue for the franchisor up 70% to just over NZ$ 8 million.

2. More than half of franchisor income derived from food & beverage sales of company owned stores.

3. Losses pegged back 67% to just over 700K.

4. Revenue for franchisee & company owned stores up by over 15% to nearly $26 million. (Food and Beverage sales)

5. 3 more stores added to take total to 28.

6. International agreements for 3 territories signed.

7. losses slowing in the last half year.

8. No "material" borrowings.

9. Cash on hand substantially lower from $3.5 million last year to just over $1.5 million.


There is good indication of improved sales and slowing losses at both the franchisor and at store level but it isn't clear as to how much of the slowing losses are due to the logical response of management to cut back on costs due to the global recession. These costs were higher in the last period and would have contributed to the higher losses.

Much of the excitement around the Burger Fuel IPO 2 years ago was in the growth for the company and spectacular growth was needed to achieve good profit for the franchisor. As this appears to have slowed in the last half, expectations would be that this growth and profit are going to be delayed somewhat until economic conditions make growth a good business proposition again. This is pointed out by an executive director of the company Josef Roberts, who has indicated that expansion has been slowed considerably in new territories in the Middle East and in Australia where consolidation and more branding will be done before any more expansion there.

High growth and profit is needed to justify the high capital value that is currently put on the company, in comparison to its profit and future prospects, and shareholders are unlikely to see any concrete sustained profit until economies of scale are reached and unfortunately that means more money being spent on building up the business.

A big worry is that more than half of company revenue is from food and beverage sales from company owned stores, the rest comes from royalties, licensing and franchise fees and advertising charges to franchisees, originally forecast to be the bulk of income for the company during pre-IPO publicity.

With just over $1.5 million of cash at hand, which is substantially lower than for the last comparable period , the company is going to have to either borrow money or go to shareholders when it wants to start expanding again.

Until then they are just marking time.


Please Note

It must be noted that 2009 figures are difficult to accurately compare to last years because the 2008 period was only for 9.5 months and management haven't indicated whether adjustments have been made to reflect that in their own figures -it looks likely not to be the case so the large increases in sales and lower losses must reflect the two different reporting periods. In addition there are many accuracies in comparisons made because of less than two years in business and one off IPO costs other costs and other revenue included previously, making current year results look better than they should at first glance.


Burger Fuel Worldwide @ Share Investor 


Burger Fuel doesnt rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungry
Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary



Discuss this Topic @ Share Investor Forum




c Share Investor 2009

Whats on Rod Duke's shopping list?

So Rod Duke and his Briscoe Group [BGR.NZ] have again expressed an interest in buying retailers in New Zealand.

I wrote a few months back about Duke's great pile of cash and it seems he has ideas burning a whole in his wallet as well.

He has been buying up a bigger share of Pumpkin Patch for his personal portfolio over the last year or so as the share price got cheaper but just what the hell has he got his eyes on?

He has NZ$62 million cash to play with.

Let me have a bit of a stab in the dark and tell you why.

Please keep in mind that I own shares in a large number of listed New Zealand retailers!


My Shopping List

Briscoe Group [BGR.NZ] The stock price is low, the company doing well and has no debt. Why wouldn't you buy back shares in your own company while they are low. Pumpkin Patch has been doing just that.

Pumpkin Patch Ltd [PPL.NZ] Duke already has a 10% stake in this company and so does a potential competitor of his for retail buys, Jan Cameron. Nevertheless he has built up his personal stake over time and it would be a coup to be able to manage this prestigious international brand.

Postie Plus Group [PPG.NZ] Struggling a bit in the past, they are doing allot better over recent times with higher sales and better margins. Their very low share price makes them a target for takeover and at less than NZ$15 million market cap Duke could swallow this company whole without batting an eyelid. They have a retail brand in Baby City that would be quite attractive to any retailer. The only major stumbling block is that Jan Cameron, the wiz retailer, who loves to buy distressed retailers owns 15% of the company.

Tasman Pacific Food Group The owner operator of Burger King in New Zealand and Australia, it has been struggling for years under competition from McDonald's and recently sold off its Hell Pizza brand for a loss. Vulnerable to a decent bid.

Burger Fuel WorldWide [BFW.NZ] A gourmet burger maker with 30 or so outlets, its NZ$16 million odd market cap makes it vulnerable. It has never made money and will continue to struggle to do so. Sales are suffering in the current recession. It will need additional capital to continue and a cornerstone shareholder such as Duke would be perfect.

Hallenstein Glasson Group [HLG.NZ] Like any retailer Hallenstein Glasson is suffering lower sales and lower margins. It is doing better than most clothing retailers but is vulnerable over the slow winter sales period.

Michael Hill International [MHI.NZ] This well run jewelry chain with over 200 outlets in 4 different markets is suffering a downturn from shoppers shunning discretionary sales and its share price is vulnerably low. There are many other Jewelry chains of various sizes in New Zealand that are similarly good targets for Duke's cash pot.

The electronics sector is going to consolidate during this year or next. Every retailer in that sector is suffering extremely badly and various chains are going to go to the wall in the next year or two.

Bad retailers who have high debt, high stock levels, poor locations and high operating costs are going to come under pressure the most. Even good retailers will be vulnerable if the retail slowdown continues for any great length.

Duke's advantage now comes because he and his Briscoe Group first had no debt and then reacted to the recession about a year ago by running down inventories and cutting those aforementioned and all important operating costs- it also helps that his stores are not inside Westfield Malls, they charge very high rents!

This gives him a big advantage over retailers like MHI, HLG, The Warehouse Group [WHS.NZ] and many other retailers Duke might have his eyes on because it is a major cost for any retailer and is often the difference between retail life and death.

I cant wait to see what will be in his shopping trolley.


Disc I own BGR, WHS, PPG, PPL, HLG and MHI shares


Briscoe Group @ Share Investor

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c Share Investor 2009