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

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c Share Investor 2011

Share Price Alert: Restaurant Brands Ltd

The all-time peak for Restaurant Brands Ltd [RBD.NZX] shares was $2.76 back on October 29 but since then the share price has retreated by 29c or just over 10% to close at $2.46 yesterday.

There doesn't appear to be anything material within the company to suggest a slow down in company fortunes and there was even an NZX share price enquiry back in late Jan when the share price dropped 28 cents in a few weeks that came to nothing so the share price fall seems to be a mystery.

I can only guess that there could be cost pressures on the business from increased raw food prices and energy costs. Every staple has risen substantially over the last few months, especially this year and chicken, the primary cost for this business, has risen 10% in January alone.

While the company will have stable contracts for supply of raw food and power these costs will rise when the contracts expire. Add to this the minimum wage rise of 2% passed a few weeks ago and one can perhaps see some validity in the lower share price.

I have been uneasy about the RBD share price for some time and in November questioned the highs the share price was reaching.

There will obviously be more cost pressure as 2011 wears on so the share price is likely to retreat from its present levels unless price rises at the counter can be increased without affecting sales too much.


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Restaurant Brands @ Share Investor

RBD - 2011 Half Year Result
RBD - 2010 Quarter one sales
RBD - 2010 Quarter two sales


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



c Share Investor 2011

Restaurant Brands share price looking overcooked

Restaurant Brands Ltd [RBD.NZX] shares reached an all time high last week when it hit a price of $2.76 on Friday. The previous high of around $2.70 was reached shortly after listing back in 1997.

The market has had a typical response to this stock. It has always overreacted to bad news and with its run over good news over the last year has done the same again.

Long term investors are in the box seat but if you are here for the fast food equivalent of an investing drive through the share price is getting a little overcooked and you might well be cautious and start thinking about setting an escape price.

If you think CEO Russel Creedy can keep up the good work consistently though, the share price might be just an incidental along the way to far greater things.

No secret recipe, just an obvious market observation.


Restaurant Brands @ Share Investor

RBD - 2011 Half Year Result
RBD - 2010 Quarter one sales
RBD - 2010 Quarter two sales


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
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c Share Investor 2010

Restaurant Brands Ltd: KFC has finally cracked it

I haven't written much about Restaurant Brands Ltd [RBD.NZX] recently, it has been quietly going about its business with pretty much good results.

Their second quarter sales release prompted me however to come out and discuss some issues surrounding the fortunes of the company.

When I last discussed this company back in early June, I commented over the distortion of figures used by KFC management to report sales figures. They didn't include inflation as part of their calculation:

"The "record" $54 million of sales reported in today's result for KFC is only a record in terms of 2010 dollars. KFC are actually serving up less chicken to fewer customers.

Their best listed year was in 1997 where they did $172.3 million in KFC sales. That is because of accumulated inflation at a very conservative 3% annually over the last 13 years amounts to 39%.

Now lets assume conservatively that RBD sell $220 million of KFC for the full year 2010 and compare that figure to the 1997 record year.

39% inflation means in 2010 dollars RBD would have to sell $67.2 million more chicken just to match the record made in 1997.

$220 million is a fair way from the figure they need to make, of $239.5 million, just to match the 1997 record."

I have also wondered whether the increase in KFC sales was a sustainable one that had a long term take with KFC customers and it looks like given $72.8 million in sales for KFC in the latest quarter that if this growth continues the company could be looking at close to $300 million in total annual sales within the next year or so. This would easily beat the inflation adjusted $239.5 million that they needed to make to beat the record year for sales back in 1997.

I had my doubts but RBD CEO Russell Creedy looks like he has found the secret recipe for this company and its future and that recipe is clearly KFC.

Starbucks and Pizza Hut, the two other brands that the company manages, are still struggling and remain an unprofitable noose around the neck of the parent company.

The only answer for me is when will they be sold so they can allow the KFC brand to flourish even further without the distractions that two other brands bring to the parent company.


Restaurant Brands @ Share Investor

RBD - 2010 Quarter one sales
RBD - 2010 Quarter two sales


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



c Share Investor 2010

Restaurant Brands New Zealand Takeover

Bongo666 wrote:

My observation is, surely they have run their ruler over it fully by now, if it is such a good fit with their purchase of Tegal(and I believe it is given the obvious synergies-cheap fricken chicken!!) why havent they moved yet? Could they be biding their time for another crap announcement? Seeing as PEP own the Collins group, a company that has been on my radar since 2000 and one that I mentioned on www.sharetrader.co.nz was a possibility of acquiring RBD, and looks like it is hungry to grow into a trans Tasman food group the absence of a bid for RBD seems curious to me. I am toying with the idea of buying a large stake, (for me) of up to 100000 shares. The possibility of this happening looks 85% certain. What do you think Snoop?


Snoopy from Share Investor Forum Wrote:

There are still some unknowns there Bongo. We don't know how much RBD will have to shell out to renew the franchises on the other half of their KFC and PH stores in May. There is the possibility that even if private equity makes a bid, and shareholders approve, that YUM will veto it. After all, RBD have been very compliant with YUMs requests on the store upgrade plans. And YUM get the franchise payments from RBD more or less regardless of the profitability of RBD itself. Why would YUM want to see RBD delisted? Do you think they would rather negotiate with a team of hard nosed bankers, or Vicky and the current crew? Finally you have to consider what might happen on the 15% chance, (assuming your figures are correct), that no bid is received. Maybe the share price will drop back to 95c or so? You could still have an 85% chance of a takeover deal going through and have an expected negative return if the downside payoff is significantly greater than the upside payoff. IMO, the only reason the share price has been creeping up in recent weeks is takeover speculation. I have my own holding in RBD that I am sitting on (neither buying more nor selling down) at the moment. You Bongo will have to make your own investment decision! SNOOPY discl: hold RBD

Happy Investing,

Share Investor

Talk RBD and other stocks @

Share Investor New Zealand


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c Share Investor 2007