Burger Fuel Worldwide: 2009 Half Year profit analysis

The Burger Fuel Worldwide [BFW.NZ] 2009 half year profit to 30 September is more of the same from this company, continued and mounting losses.

Revenue is up strongly but so are expenses, and the loss, while down by more than 50% to $NZ 296,000, is still a loss and is difficult to compare with last year's half year loss because that figure could be stacked with IPO expenses and other establishment costs -this is not clear from the accounts - and does include a more fulsome period of new store construction by new franchisees.

Cash reserves have dwindled down to below $1.5 million, from over $2 million in the previous corresponding period. While still conservatively geared at a debt to equity ratio of around 32% that cash balance is going to dwindle if the company is to get back on track and deliver the growth they promised in their July 2008 IPO.

As franchisors the only significant income BFW are currently receiving is their cut of franchisee sales and advertising income. The promised windfall of franchise and management fees are paltry at best.

More money was earned from cash in the bank than franchising and construction fees combined.



Key Points from BFW 2009 Half Year

1. $296,000 loss - down 54%

2. $4.2 million revenue - up 19%

3. Cash reserves down 25%

4. Earnings per share -52c VS -$1.26 last year

5. No new stores added

6. 2 stores in Australia incurring significant losses.

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Burger Fuel Worldwide @ Share Investor

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c Share Investor 2009

NZX Share Split good news for profit takers

The announcement of a 3:1 share split and improved dividend payout by the the New Zealand Stock Exchange Ltd [NZX.NZ] shows that directors of the company are confident that future performance of the company is going to exceed market expectations.

The share split is an attempt by the NZX to get more mum and dad investors on their share register as the bulk of shareholders are currently brokers -who used to privately own the company - and those on the "inside" of the stockmarket industry.

This is the second time the stock has split since its 2003 listing.

The theory of stock splits is that by making shares "cheaper" it increases liquidity and enables more people to own shares.

In practice though, splitting shares has no material long term effect on the company doing it - and nor should it - and rarely does much for liquidity.

The main effect a stock split has is to allow short term investors to make good quick profits based on the typical rise of the pre-split share price and then dump the shares before the stock splits.

Post split, shares sometimes rally as well so there is opportunity there to turn a fast buck.

This kind of "sleight of hand" with shares is rarely sustainable for any long term share price increase and it is back to basics for concrete results to get a real indication of a market value for a company.

If you are keen to make some fast moola there should be more to be made before the record date for the share split on Monday 21 December 2009 . The share split will happen after market close on Monday 21 December and be effective on, and from, market open on 22 December 2009.

NZX shares have rallied around 60c on the news since it came out on Monday 7 December so if you take the plunge please be aware of the risk involved.

Good luck!


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c Share Investor 2009

Stock of the Week: Telecom Ltd

Telecom New Zealand Ltd [TEL.NZ] is a good stock to trade rather than hold long term simply because the trading volume is consistently the highest on the NZX and that is why I have included the company in this Stock of the Week series.

I am not a chart man myself or a short term trader but if you look at the one year chart above there has been a good deal of money to be made in the earlier part of 2009, going from around 10c per share right up to 60c per share profit.

The share price reached an 8 month low of NZ$2.36 yesterday and has risen like a roller coaster (hence the trade possibilities) from a year low reached in mid January 2009, so one could assume that indicators are showing that an opportunity exits for a good trade at these stock price levels and a good range for profit made considering its recent trading history.

I don't like the long-term prospects for the company, it still has a defensive, reactive culture with employees who are badly trained and informed on what they are selling and poor service levels but it has a 10% plus gross dividend and it isn't going to go out of business any time soon.

Shorties will win here.

Good luck!

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c Share Investor 2009

Carbon Trading: A good reason to exit the Stockmarket

When your taxi driver, next door neighbour and friends at barbecues start talking about how much money they have made buying carbon credits on the NZX, which start trading in New Zealand in July 2010, you will know it is time to exit the New Zealand Stockmarket, and other global stockmarkets as well.

Whether you think the theory behind climate change, which carbon trading is supposed to help ameliorate, is true or not - and it has been proven it isn't - carbon trading is going to be the buzz phrase of 2010 and beyond. As the price for these carbon credits increases, and it will, it is going to take stockmarkets on a ride with it not seen since the Internet boom on the late 90s.

Like that boom though, Carbon Credits have no real assets behind them to back them up, they are simply "made up" and the revenue that flows from these credits is based on political maneuvers and manipulation rather than real economics, so the ride isn't going to last forever.

As I picked almost 2 years ago I expect a bull run for the NZX in 2011, for different reasons back then but the carbon trading market is going to be part of the resurgence.

This isn't about knocking global warming or carbon trading though, because others do it better and quite frankly it is easy to do because of the sheer kookiness of it all. This is about my strategy to get out of the stockmarket before the carbon trading market inevitably collapses and takes everything else down with it.

I prefer my own exit strategy, I don't like being pushed. but I reckon i will have little choice once this pile of bullshit gains momentum.

How bad it will be nobody knows but the carbon trading market is likely to get intertwined in every facet of our lives as well as our financial markets so any fallout from its collapse will be significant.

I just have to wait for those first signs to come and for every Al (oh hang on HE already is and is already making moola out of it), Dick and Harriet to start blabbing constantly about it and I know the market will be near its peak.

Keep that in mind if you are going to get into carbon trading directly or the stockmarket in general and head for the exits if you dont want to lose your carbon neutral shirt.

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c Share Investor 2009