It did offer a massive buying opportunity... I've been waiting for my margin account to clear to increase my holding even further but it got approved a little too late. I've given up hope of it falling back again, especially with next quarters sales announcement coming up, which due to the one off gain of the double down will likely be bumper. So might as well post the following:
I really like RBD right now, and luckily was able to more than double my holding during the price weakness.
The reason I really like RBD are for the standard reasons the FA's on this forum harp on about: strong dividend, low debt, full imputations etc... it's a solid company at a very good price.
However the main reason I have increased my holding recently was the comment by management that they would slow their capex spend this year, (10 KFC renovations last financial year vs. 5-6 smaller KFC renovations this year). I estimate they will spend <$15 million capex this year which leaves more than $10 million in additional funds available for either reinvestment or distribution. If they distribute this then it would be another 10 cents distributed per share, taking the dividend payout from 15 cents to 25 cents.
In all likelihood management wont distribute it all, they will look for additional opportunities, pay down debt, and hopefully distribute at least enough to fully use its imputation credits. I'm estimating they will put the dividend up to 20 cents over this year and then possibly a further increase it next year.
There are c.34 stores left for renovation, with a schedule of 5-6 per year all stores will be renovated by FY2017, a total transformation time of around 11 years. This seems reasonable and after this time renovations would likely start again, but that's ok as the re-upgrades would not need to be as drastic. Currently KFC store renovations cost between $1.2 to $2.0 million, so I feel c.$15 million capex is quite reasonable even after allowing for the other franchises etc.
I'd expect the share price will go up if RBD announce a dividend of 20+ cents, as I don't believe this is being fully allowed for by the market.
Assuming I am correct the FCFE this year would be c.$25 even without taking into effect one-off gains from the Double Down and RWC (minor impact?).
Cheers
Te Whetu*
DISC: Over c.55% of my investments are RBD... I'm not investing further at $2.74 news comes out that changes my opinion. But also not selling below $3.10 without news to change my opinion. Even at $3.10 I would not exit I would only reduce to rebalance.
* is hoping for another drop in share price... but not expecting it as the trendies have likely already sold out :p
EDIT: Sales update just out, KFC sales were only $1,000 off what I'd been forecasting... feeling fairly good about that. Pizza Hut $1.6 million below my expectations. Have never got around to forecasting Starbucks, but looks like an ok result.