RBD - Restaurant Brands

[Deev8]

You cant compare Dominos with Pizza Hut.

I would say that comparing two companies in a similar line of business - they both sell pizza - could be quite useful.

[Snoopy]

Interesting to see you still convinced your right and the market wrong by buying more. Macdunk

Macdunk, my purchases are part of a carefully controlled 'thrust into retail' strategy. Why retail? Because it is liable to be the worst performing sector over the next twelve months. Everyone knows that which is why prices in that sector have been hammered down. And now is the best time to take advantage of that negative market sentiment.

The retail market is a contiuum of 'consumable essentials' to 'big ticket discretionary spending'. The most essential consumable is food. It doesn't matter what happens in the economy. People still have to eat. Also RBD is a cash business. RBD don't have to worry about people not paying for their pizza on account! So IMO from a global ongoing business perspective, RBD is low risk.

There are of course operational issues at RBD. But that is why the shareprice is discounted so heavily. Indeed it was the spoof NBR article that finally made me decide to purchase. For that meant the business was being rated as a joke, and was not being analyzed seriously by 'the market'.

I have made a mistake in my 'thrust into retail' strategy. I was assuming a one in five year business downturn, and it appears we could be headed for something rather worse. However, the response to my mistake is not to buy less retail shares. It is to spend the money I was planning to spend on more conservative retail prospects, until the timing of any retail recovery becomes clearer. At that point I will stop buying RBD and start buying TUA which is up towards the big ticket end of the spending continuum.

So why not wait until the share price turns before investing? Well the first leg of any recovery is always the safest. And I cannot earn anywhere near the amount from cash in the bank as I can from RBD shares, for as I said previously:

"The case for investment, since 1998 has always been based on dividend yield."

My investments are always made from a forward looking perspective, and there is no difference with yesterday's one into RBD.

SNOOPY

[Snoopy]

My purchases are part of a carefully controlled 'thrust into retail' strategy. Why retail? Because it is liable to be the worst performing sector over the next twelve months. Everyone knows that which is why prices in that sector have been hammered down. And now is the best time to take advantage of that negative market sentiment.

The retail market is a contiuum of 'consumable essentials' to 'big ticket discretionary spending'. The most essential consumable is food. It doesn't matter what happens in the economy. People still have to eat. Also RBD is a cash business. RBD don't have to worry about people not paying for their pizza on account! So IMO from a global ongoing business perspective, RBD is low risk.

So why not wait until the share price turns before investing? Well the first leg of any recovery is always the safest. And I cannot earn anywhere near the amount from cash in the bank as I can from RBD shares.

Bad news for the retail sector today:

Pumpkin Patch predicting further declines in sales....

Hallensteins delaying the move of their purchasing centre to Australia.....

So I have taken the opportunity to pick up another helping of Restaurant Brands shares - my biggest ever buy up in terms of number of shares (if not in dollars).

That's because I decide how much money I want to spend well in advance. And if the share price goes down in the interim, I just buy more shares on the day. That is how 'value averaging' works - to make sure you buy more shares when the price is low and fewer shares when the price is higher.

RBD is the one retail share where the MD is not talking gloom and doom. In fact MD Russel 'One L' Creedy bought up big last month to the tune of 50,000 shares.

At 60c per share, the price I bought at today, and with an annual dividend payment of 6cps, this equates to a gross dividend yield of 15%. With the reserve bank indicative rate tipped to fall to 5.5% next week that income gap is in my judgement starting to become irresistable to the income investor.

I don't often make specific predictions. But I think the RBD price will hit 80c before this summer ends.

SNOOPY

discl: hold RBD

[Dr_Who]

Hey Snoopy, do you think the div is sustainable for the next 2 years?

Are you gonna file a SSH soon? LOL

[duncan macgregor]

I'd still say a rise of under 2% is just as likely to be noise than anything significant



I'm not so sure RBD ever *has* traded with the rest of the market!

Both Phaedrus and Macdunk have pointed out to me several times that RBD didn't really take part in the market rally over the last two years. Largely I suspect because the market decided it was a 'zero growth' share. That is the negative way to look at RBD.

On the positive side a 'zero growth' share will not go down in price either, unless the outlook for the business deteriorates significantly. Management forecasts 'steady as she goes', and so sails the share price - even in a falling market.

SNOOPY

SNOOPY a little extract to remind you of the risk you take chasing dividends ignoring the downtrending share price. I think the share price was double what it is today when you wrote that. Macdunk

[Snow Leopard]

quote:Originally posted by Snoopy

Both Phaedrus and Macdunk have pointed out to me several times that RBD didn't really take part in the market rally over the last two years. Largely I suspect because the market decided it was a 'zero growth' share. That is the negative way to look at RBD.

On the positive side a 'zero growth' share will not go down in price either, unless the outlook for the business deteriorates significantly. Management forecasts 'steady as she goes', and so sails the share price - even in a falling market.

SNOOPY

A zero growth share with a good dividend yield in a probable zero growth market is not a bad thing.
However what you really need is a share which will actually over time grow earnings, share price and dividend to provide returns in line with with the average market growth.
Does RBD acheive this?

Reading back through the announcements from this company and the aborted takeover it is difficult to feel that although this may recently have have been a reasonable buy for the short term that as a longer term investment this is a company going nowhere and the risks of the assorted franchises are slowly mounting....

Disc: It is Hell for me.

[Steve]

In yesterdays ODT there was an article & photo on the Dunedin North KFC being shut down on Friday with a 'D' rating. Management declined to comment...

Also, for those interested, the South Dunedin KFC is being completely upgraded. It has currently been reduced to its timber frame. I am looking forward to see what the 'new' model of store will look like.

[duncan macgregor]

BONGO, The minimum wage will have no effect on the profit margin. The competition has to pay it as well one cancels the other out.
Bird flue now spread to india humans catching it of birds is only a small step away to humans getting it from humans. If that happens KFC had better learn how to make KENTUCKEY FRIED LAMB. MACDUNK

[winner69]

quote:Originally posted by hiawatha

quote:The minimum wage will have no effect on the profit margin. The competition has to pay it as well one cancels the other out.

The fish & chip shops probably won't; but in any case a fall in profit which is experienced by everybody is still a fall in profit.
hiawatha

They all stick the pricess up ... might even make more money

[Snoopy]

quote:Originally posted by bongo66

Egged on by Matt Mc Carten and his commie mate in parliament-i forget her name-Starbucks employees in Newmarket went out for 2 hours over lunchtime.

They want a minimum $12 an hour, no youth rates and guaranteed working hours for part-timers.

If this should come to pass it would almost bury RBD-wages are one of their biggest costs.

A wild claim? There isn't enough declared information in the RBD annual report to be sure. But let's try to verify it anyway.

There is a provision for employee entitlements in note 14 of the annual report. If the 'partners' turn over once per year, there are many lower skilled job employers that don't allow annual leave to be taken until one year in the job has been served. So we might guess that the $5.734m figure quoted represents 3/52 of the total employee wage bill.

If that is true , the employee wage bill is:

$5.734*52/3=$100m. Of course 51 of the 278 listed stores are not in New Zealand. Australian wages tend to be higher anyway, by let's say 20% in NZD terms. That makes the Oz stores equivalent to 61 (ten more) stores in 'NZ wage' terms.

That means we can estimate the NZ wage bill at:

$100m*([278+10-61]/10+278)= $79m

Remember that includes associated head office expenses that I have previously estimated at $4m. take that off and you get $75m

Does that sound reasonable?
$75m/227= $330,000 per store. Spread that over 16 staff and you get an average wage of $20,625pa. Still sound OK?

Boost the wage bill by 20% (from $10/hour to $12/hour) and you get an extra wage cost of $15m, equivalent to last years profit of $11m if tax is added back onto it. So yes, RBD's profit would be wiped out, assuming that they would not be able to recover any of these increased costs (a doubtful assumption). Bongo's claim looks in the ballpark at least. No doubt the economics of other wage paying fast food outlets are similar.

My take on these figures is that 'deep down' the unions know that a 20% wage claim isn't going to happen in one hit. But of course you have to aim high in wage negotiations! Auckland workers may find their plight alleviated by Auckland house prices falling 20% instead!

SNOOPY