Stock's I'd buy, at a price: Burger Fuel

Now I have given Burger Fuel Worldwide [BFW] a LOT of stick over the last year or so about some of their decisions and their initial IPO being way overpriced.

So much stick in fact that one of the directors that I had a friendly acquaintance with and could contact him about company progress no longer returns my calls.

Tough luck, never mind Mr Rickard, get over it!

Well, I don't really have anything to get over, never had Josef Roberts , I really love the concept, brand and company. I just don't like the value that you place on it.

The initial IPO put the capital value of the company at NZ $60 million, it is now worth less than half that at today's share price. I would personally value it at around $10 million, roughly a third of today's value, as a purely speculative play, rather than a solid business investment.

Sales for the franchisee outlets run at approx $20 million of which BFW, as the franchisor, have around a 10% gross cut of that figure, for royalties, group advertising spend ,management and training and other fees. Around $2 million gross.

Company start up costs and early expansion have chewed up a value meal sized portion of that $2 million plus the same sized portion again, making for a just over $2 million loss.

Theoretically these costs should be proportionally smaller as the company grows and so does revenue but if you were looking at putting a value on the company today, you would have to discount today's capital value down from $30 million to $10 million because of uncertainty over those continued expansion costs.

As an investor you would have to ask yourself how much would I pay to get $2 million of gross revenue per year? Personally I wouldn't pay more than $10 million bucks.

Wheres the present and future value of Burger Fuel though?



Burger Fuel: Yummy Burgers, but a highly
over-valued Brand.

Well. I reckon BF management put most of the value in their company in its brand, which is a strong one, and one that management relied upon to get investors interested in the IPO, but as I have mentioned before I think they put too much value in that brand.

Which leaves me with a more realistic valuation based on a dollar return and high risk, rather than possible worldwide domination of Burger Fuel's fast food outlets.

I'm interested therefore at buying at anything around 17c per share, it is at 40c today and its IPO price last July was $1.

I must note the share price has been down to a low of 11 c.

Are we friends again Josef? I love your Bastard Burger.

Burger Fuel @ Share Investor

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c Share Investor 2008