He's nearly eighty but I suspect you are correct and he jumped the gun and not understanding details.
Printable View
Haha sounds like my dad. (He is not 80) but would jump up and down having expected the full amount to be taken and not realising that all is good.
On another note, I see the SP has taken a dive and is now well below the $9.45 received for shares. Some may be tempted to buy back in, I myself may just wait a bit longer and see where it is headed.
Wonder what happens to the divvy not paid because of the takeover proposal. Paid on the remaining shares?
Post Global Valar gaining 75% of the shares there have been steady volumes of shares changing hands.
Last look they were trading at $9.23 and I did note a few days back at one stage a parcel of 74k went through at $9.30 (not sure if all the volume was at that price?)
This price strength is well ahead of what a couple of punters were picking on here. Perhaps it is unjustified?
I picked up a few shares at $8.40 and could have had more at a better price if I'd been more on to it.
It will be instructive to see how Global Valar behave toward minority shareholders. That and company performance will decide
if I keep or sell the shares in RBD that I have.
Russel said shares would be 10 bucks one day
Russel a good guy
https://www.nzx.com/announcements/333406
EPS going backwards tells the story.
Must be many who are very happy that the partial takeover happened when it did!
If you use the net profit after tax 'excluding non-trading items', then the five year increasing earnings per share trend is very much intact.
Net Profit/No.of Shares
FY2015: $22.523m /97.871m = 23.0cps
FY2016: $24.207m /102.871m = 23.5cps
FY2017: $30.567m /122.843m = 24.9cps
FY2018: $40.361m /123.629m = 32.7cps
FY2019: $42.2m /124.750m = 33.8cps
However based on Monday's closing price of $9.10, the shares are trading on a PE ratio of :
$9.10 / 0.338 = 26.9
A good company, but that PE is 'getting up there'. Confirmation received that the final dividend for the year will never be paid. As a foundation shareholder holder who still retains around 20% of my shares post takeover I am happy with the result. I am disappointed there will be no final dividend, but not surprised. I won't be topping up my shareholding at such lofty multiples when future capital raisings have been talked about though. But am happy to stick with the shares I have left.
SNOOPY
One piece of 'dead wood' (Starbucks) has been lopped off. Cost savings will flow through to NPAT growth. Maybe 'Carls Junior' will be next? Carls might have to stay on the books until the initial franchise agreements start to run out. But it looks like no more management time will be wasted on the roll out of this brand given the now global outlook for Restaurant Brands.
Parent franchise holder 'YUM Brands' are determined to sell off as many of their in house company owned restaurants as possible by the end of 2019. Our Russel is a bit of a 'poster boy' at YUM. I am picking the talked about acquisition of certain west coast of the United States restaurant assets will go ahead. So there is where the 'next step of growth' is going to come from. But as to whether that will be 'eps growth' is another question entirely!
SNOOPY
Reprising the 'Achillies heal' from the Restaurant Brands result from last year: net profit margin.
This is the net profit, excluding non-trading items, divided by the total sales for the year. Note that in a change from the 2015 perspective I am now including 'other revenue' as part of the representative on-going revenue of the company. This is because the largest part of other revenue is money received from YUM to act as master franchise holder for Pizza Hut in New Zealand. And this is a revenue stream that will be on-going
2015: $22.523m / $372.803m = 6.0%
2016: $24.207m / $404.095m = 6.0%
2017: $30.567m / $517.549m = 5.9%
2018: $40.361m / $766.289m = 5.3%
2019: $42.2m / $794.0m = 5.3%
The profit margin hasn't got any worse, which is a positive. But it hasn't got any better either. Our Russel has given an object lesson in how to reduce profit margins.
Conclusion: Fail Test
SNOOPY
PS Not tempted to top up at today's close of $8.65 either!
Thanks for all the free analysis provided here Snoopy. I do appreciate it and it has helped me not purchase new RBD shares with my $9.45 money and will actually be looking to deploy it elsewhere unless I can get RBD for under $7.50 now. (yes I have changed my parameters). I cannot see them going anywhere with a PE of 26. Just too high.
Went to RBD (KFC) store in Dannevirke of all places a few weeks ago and the Mrs who only goes once every 10 years thought she would be clever and order the "Veggie Burger". To her chagrin and my mirth the veggie turned out to be a hash brown. I mean really KFC. That is just terrible. Anyway suffice to say I had a 3 piece quarter pack and was happy with my purchase.
Looks like Russel will need to keep dreaming
Axing the dividend won’t help ...but most who got the 945 might forgive them this time round.
In the dark old days when despair reigned the divie was about the only thing that supported the share price ..but they were good divies.
RBD might do a Telecom / Spark - when they slashed the dividend the share price started slip sliding away never to reach the highs again.
Snoopy me old mate let’s reminisce with this bit from Gaynor in the NZ Herald in 2004
On August 15, 2000, the same day as the bid for the remaining 20 per cent of AAPT was announced, chairman Roderick Deane told the market that the telco was changing its payout ratio to 50 per cent because of its growth outlook.
Immediately before the announcement, Telecom's share price was $7.55. It plunged to $4.81 by the year-end and the dividend was cut to 20c a share where it has remained until the 2.5 cent increase in the March quarter (the 12-month dividend is now 22.5c).
I think it is very clear from the Takeover document that priority will be given by the new owners to 'growth', rather than using cashflow to pay dividends.
And given the amount of wealth they already have, last thing on their mind will be dividends! It is all going to be about growth.
So over time, it is inevitable that those seeking dividends will sell out.
Question - will NZ market ever embrace a 'growth' stock with less than double digit growth rate?
The $10 share price is an aspirational hurdle only now. How many here remember when Nigel Morrison took over as CEO of Sky City and announced that his target was to increase the SKC share price to $10? $10 sure sounds good though.
That $10 share price target for RBD shares was linked to the granting of performance options to Russel and Grant Ellis. But with Global Valar on the scene, they got given the free shares anyway. I expect we shareholders will be asked to support a new senior management share package in due course, which may or may not include that $10 target.
In fairness, I would suggest that there is more technology risk in a Telco than a company that serves up chicken pieces. The AAPT acquisition turned out to be a flop. But whether that could have reasonably been foreseen at the time of the acquisition is another matter.Quote:
In the dark old days when despair reigned the divie was about the only thing that supported the share price ..but they were good divies.
RBD might do a Telecom / Spark - when they slashed the dividend the share price started slip sliding away never to reach the highs again.
Snoopy me old mate let’s reminisce with this bit from Gaynor in the NZ Herald in 2004
On August 15, 2000, the same day as the bid for the remaining 20 per cent of AAPT was announced, chairman Roderick Deane told the market that the telco was changing its payout ratio to 50 per cent because of its growth outlook.
Immediately before the announcement, Telecom's share price was $7.55. It plunged to $4.81 by the year-end and the dividend was cut to 20c a share where it has remained until the 2.5 cent increase in the March quarter (the 12-month dividend is now 22.5c).
I think many of us would have experienced a vast change in the way we consume Megabytes over the last fifteen years. Yet the microbites needed to consume chicken require much the same hardware as they did in 2004.
SNOOPY
Snoops ...Russel often mentioned the 10 bucks as the share price increased ....even if it was a bit of inside joke.
Down 8% since profit announcement
I can see this going down to the mid 700s in next month or so
$7.50/33.8 = 22.1
A PE of 22 is still a good growth premium. But if the Taco Bell rebuilds in Hawaii go as well as the KFC rebuilds did in NZ, and more scale can be obtained from the KFC operation in NSW, then who knows? KFC in NZ now trying a new 'motorway stop' branch. The KFC 'dine in experience', free of pesky motorised customers, is going from Auckland to other NZ cities. Lots of incremental opportunities here. The big question is, what will Global Valar bring to the business?
Russel gave an interview on RNZ this morning that hinted at not needing new capital. I thought that was a bit odd considering security of access to new capital was mentioned as a driving force to accept the partial takeover.
RBD still in the NZX50 index I think, but not for much longer? I wonder when the index funds will be forced to sell out? That might be the top up buying opportunity that some on this thread are looking for?
SNOOPY
Kentucky Fraud Chicken: How a man got free KFC for a year
https://www.nzherald.co.nz/lifestyle...958&ref=clavis
Received my free meal voucher in the mail today. 2 pieces of chicken, a drink, chips and a potato and gravy. Being a practical joker I have color copied the voucher and I am going to attempt to pass this off at my local store. Some of the youngsters that work there are not the smartest tool in the box so it will be interesting to see if it works. On another note, I am surprised by the continued high price of RBD, so it is possible that the Mexicans have a good deal. I am not yet convinced, time will tell.
I am surprised too blackcap, and the incremental return on equity exercise (below) I did in January still stands.
The return on the new funds from the 2016 cash issue still looks mediocre.
I still retain the balance of my own shares that I did not sell into the offer. I have resisted the temptation to build that shareholding up again. 'Rationally' I suppose I should have sold the balance at $9. But people aren't keen to let go of winning investments. And if people like me aren't willing to sell, those wanting in have to pay a high price. The law of supply and demand at work?
And the point of such a practical joke is what? To get some green recruit into trouble? I hope that if your 'experiment' works, you will quickly come clean and produce the real voucher. That would at least be of use to shareholders!
For what it is worth, when presenting my 'shareholder KFC Card" to my local KFC in the past, they have always been looked at very carefully.
SNOOPY
That is pretty denigrating of the staff that work in a business in which you have stake.
So you want to manipulate people you consider to be gullible?
Is your ruse even cost-effective? You would need quite a decent printer for a start and the sort of paper they use for vouchers...plus a journey to your local restaurant. After doing all that you may not be successful with the possibility that a complaint could be levied with the local constabulary - Not to mention the waste of time and lack of meal.
Bjauk, its a practical joke, a ruse, do not get so upset. I am not out to defraud RBD, I am a shareholder afterall. If it works once, I will inform staff and management and have a bit of a laugh about it. I do know on past occasions that staff look at the vouchers all funny and often not sure what to do. There are plenty of KFC vouchers that you need to print from your pc (standard ones) and as such the need for a good printer is non essential. I just color printed on my $50 printer and that should do the trick.
Percy, if it works, I will send you a bunch :)
Chanchay, I take on board the Mexican jail warning. Thank you!
Following my March 2019 post, the remaining shares are trading at $9.45 already! I have to admit I am stunned as there has been no real strategic news following on from the closing of the takeover offer at an effective price of $8.89 (my post 2439). Big announcements expected at the upcoming AGM? I am also surprised that RBD is hanging onto its position in the NZX50 now that 75% of the shares are locked up. I am still hanging on to the balance of my shares post the takeover.
Feeling a bit guilty now with my campaign to convince shareholders that the share price would fall substantially post takeover. But I don't retract any of my analysis that lead me to that decision. Maybe it is just a case of the market behaving in mysterious ways over the short term?
SNOOPY
Good recent trading update and 9.52 at close today. Now the share price is above the recent partial takeover price. Used one of the shareholder vouches today. Didn't particularly like the KFC but it was good to see the outlet very busy!
Another article today in stuff about RBD I introducing Taco Bell to NZAU soon. Starting with 2 stores then 60 over the next 5yrs. Interesting that almost all comments have been negative to the idea - no one seems to like taco bell that much, and don't see them competing against existing mexican stores very well.
Wondering whether RBD might be shoving money down a large drain?
It remains to be see seen how Taco Bell will work in Australasia. It has been a success in Hawaii and is growing strongly in that market. For Year 2020 the effect of the roll out of Taco Bell in Australasia is not expected to make a material difference to financial performance. RBD have shown with the dropping of the Starbucks franchise and care taken with the Carl Juniors roll out that they will modify plans if that is called for.
I have used the net profit after tax, excluding non-trading items for the purpose of this comparison. Non trading items include those associated with store closures and sales transformation costs and insurance payments. These are omitted because they obscure how the business is performing on the ground.
Net Profit/No.of Shares
2015: $22.523m /97.871m = 23.0cps
2016: $24.207m /102.871m = 23.5cps
2017: $30.567m /122.843m = 24.9cps
2018: $40.361m /123.629m = 32.7cps
2019: $42.181m /124.758m = 33.8cps
Conclusion: Pass Test
SNOOPY
This is the net profit, excluding non-trading items, divided by the total sales for the year. I am now including 'other revenue' as part of the representative ongoing revenue of the company. This is because the largest part of other revenue is money received from YUM to act as master franchise holder for Pizza Hut in New Zealand. And this is a revenue stream that will be ongoing
2015: $22.523m / $372.803m = 6.0%
2016: $24.207m / $404.095m = 6.0%
2017: $30.567m / $517.549m = 5.9%
2018: $40.361m / $766.289m = 5.3%
2019: $42.181m / $824.915m = 5.1%
With this statistic either staying still or going backwards there is only one conclusion I can make.
Conclusion: Fail Test
SNOOPY
From the Buffettology Workbook, p149
"We take the per share amount of earnings retained by a business for a certain period of time then compare it to any increase in per share earnings that occurred during the same period"
In this instance the 'per share earnings retained' has been supplemented by a whole lot of new capital raised with the October 2016 cash issue. I will use the change in shareholders equity from the reporting date before the cash issue (EOFY2016) to the end of FY2019. The extra year that I have brought into this comparison since my FY2018 perspective includes the Hawaiian acquisition (as before), but also the first full year that included all (61) of the Australian KFC outlets acquired to date.
EOFY2016 Change EOFY2019 Normalised Earnings {A} $24.207m $42.181m No. of Shares {B} 102.871m 124.758m eps {A}/{B} 23.53c +10.28c {D} 33.81c Owner Equity {C} $75.617m $224.670m Owner Equity per share {C}/{B} 74c +$1.06 {E} $1.80 Return on Incremental Equity / Share {D}/{E} +9.7%
The above result is disappointing. RBD has suspended dividends to fund their expansion plans, raising an incremental amount of new capital to add to the cash issue capital. I would argue that the new capital raised in the cash issue in October 2016 has now had sufficient time to be deployed. Yet the return on new capital over our comparative period has barely improved from FY2018 perspective comparison.
I don't know what the generally accepted value of the cost of capital of RBD is in 2019. But I would guess that 9.7% not far away from it. There must now be doubt as to whether all the new capital being raised is even earning its cost of capital when deployed. This problem is hidden by the extremely strong cost of capital being earned in the legacy New Zealand business.
SNOOPY
Thanks for the overseas ROE perspective Snoopy. The ROE post acquisitions for RBD is 18% according to one piece of info I've got. What I'll watch with is interest is to see if management can extract better ROE going forward from the largely recently acquired non NZ part of the business.
In my post 2533 I calculate ROE for the whole company 'post acquisitions' at 18.8%. Of course that figure will vary depending on what profits you regard as representative and whether you wish to estimate a representative value of shareholder equity that covers the whole year or just take the equity figure at the end of the year.
Better than 9.7% you mean? It is not very encouraging to see this ROE figure little changed from what it was the previous year. I would have expected it to get better! I know there have been planning approval delays in Hawaii, that have delayed the refreshing of 'Taco Bell'. So maybe it will come right in the end? But the growth of Taco Bell in Hawaii seems to have been offset against a declining Pizza Hutt business in Hawaii. Furthermore I don't see any 'excuses' coming out of Australia. Couple that with Russel's comment in AR2018 on stores acquired being much less incrementally profitable than new stores built and the outlook looks to be RBD losing sales quality out of their newly invigorated Mexican powered sails.
SNOOPY
Looking back over blackcaps impressions from the 2018 AGM, the comment in bold stood out. This is what Buffett calls 'the institutional imperative.' In numbers terms, this is what my post 2535 shows up. In word terms it means buying up businesses to increase the headline turnover to build your own ego, rather than very selectively acquiring assets to build profits at increasing margins for shareholders.
Looking back over the 2019 meeting addresses, Russel was very vocal about the reduction in excess packaging lessening the waste to landfill. He forgot to thank his conservationist parents for leaving the second 'l' off the end of his name though. That simple act would have saved thousands of litres of printers ink over the years.
Russel was also keen to welcome Finaccess:
"The significant investment that Finaccess Capital has made in the company and the unequivocal support for our growth strategy provides a firm platform for the next big push and I look forward to working together to deliver on these plans."
What was not mentioned was that the net new capital injected as a result of Finaccess coming onto the RBD register was zero. For every dollar that Finaccess invested into RBD, the bought out shareholders removed exactly the same amount. It was at least good to see that Russel didn't curse existing shareholders that accepted the Finaccess offer for withdrawing their capital from the company!
The actual new capital supplied to RBD was in fact due to the cancellation of the dividend. This is contrary to what was suggested in the takeover documentation of no change in dividend policy and the hints of support for future capital raisings. Don't get me wrong. I actually think that the withholding of dividends to fund growth makes sense. But I do wish Finaccess had been more up front about their plans. Maybe I have spoken too soon and the scramble to buy a beachhead into the United States mainland will see that cash issue materialise?
The NPAT (excluding non-trading items) forecast result for the new financial year is in excess of $45 million. In 'eps' terms this equates to:
$45m / 124.758m = 36cps
At yesterdays close of $9.70, this represents a forecast PE ratio of:
970 / 36 = 27
That seems very high for a company growing earnings of 5 to 7 percent per year and whose IP consists of the detail working over of a restaurants internal layout. I was going to include choosing great restaurant locations. But RBD have admitted to many poor decisions on new restaurant opening sites in the past. Meanwhile 'YUM brands' own the IP to most of the food sold and even dictates the marketing spend.
This FY2019 forecast represents earnings growth of $45m/$42.181m = +6.7%
Let's hope that RBD have a strategy of under promising and over delivering!
SNOOPY
discl: Accepted the takeover offer and don't regret doing so (without the benefit of hindsight). Still holding the remainder of the shares I was left with.
There has been little interest in the debt position of RBD over recent years The above quote is from 2008! RBD has obviously survived and thrived since then. One advantage of being in the fast food industry is that accounts are normally paid 'on time' and 'in cash'. Furthermore stock turnover is rapid. This enables a fast food business to carry more debt than other retail businesses as cashflow is better. But how much debt is too much debt? Now that RBD has become a 'growth company' and dividends have been suspended, this is a question we shareholders should consider.
My favourite debt measure remains 'MDRT'. Put simply, MDRT is the answer to the question: "If all earnings after tax were poured back into repaying the company's bank debt, how long would that take?" When working out this, we must use a company's declared IFRS profit, not a normalised profit. It takes actual cash to repay a bill!
FY2015 FY2016 FY2017 FY2018 FY2019 Bank Term Debt $12.675m $22.550m $46.482m $166.815m $145.853m less Cash and Cash Equivalents ($1.575m) ($1.093m) ($70.390m) ($10.410m) ($15.034m) equals Net Debt {A} $11.100m $21.457m NM $156.405m $130.819m Declared NPAT {B} $23.830m $24.070m $25.595m $35.466m $35.741m MDRT {A}/{B} 0.5 yrs 0.9 yrs 0 years 4.4 yrs 3.7 yrs
The anomaly in the table was the large amount of cash carried on the balance sheet at EOFY2017. That cash was raised for the Hawaiian settlement that was still pending at balance date. $94 of this cash was raised through the share offer dated 26th October 2016 via a 1: 5.15 cash issue. If we remove that cash from the balance sheet we can get a more representative MDRT figure:
$70.092m / $25.595m = 2.7 yrs
2017 was also the year that RBD announced their change of direction to become a global rather than a solely New Zealand based operator of restaurants. Underlying EPS has risen from 24.9cps to 33.8cps from FY2017 to FY2019 over the two years since. But debt has ballooned as well.
My rule of thumb for the MDRT answer in years is:
years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern
So no concerns from me with the debt at EOFY2019 levels. Yet given the poor rate of return on RBD's overseas acquisitions so far (my post 2535), the capital position after RBD's next much mooted acquisition may or may not have to be reassessed. The size of any new subsequent acquisition will be the deciding factor.
SNOOPY
For a company that has an appetite for borrowing, it is useful to know what borrowing rate they have negotiated. Note 6 of AR2019 shows that loans have been taken out in three jurisdictions: NZ $NZ12.200m, Australia $NZ77.921m and USA $NZ55,732m. The individual interest rates in each jurisdiction are not detailed. Yet based on starting and finishing total balances for the year, and knowing the overall finance bill, we can calculate an indicative figure:
$6.797m / [1/2( $145.853m + $166.815m )] = 4.3%
RBD has taken out several interest rate swaps, the details of which we shareholders can find under Note 6 in AR2019. Generally an interest rate swap is taken out to provide certainty in a payment stream going out into the future. However, taking out an interest rate swap also implies the loan rate is somewhat favourable. If it was not so, then the company might just eschew the derivative and rely on the spot interest rate payable at any time.
Using indicative exchange rates of $NZD1 = $USD0.67 and $NZD1 = $AUD0.95, the total interest rates swaps in NZD terms add up to:
($5.0m+$10m) + ($15m+$20m)/0.95 + ($10m+$10m)/0.67 = $15m + $36.8m + $29.8m = $81.6m
This is well shy of the actual total loan amount of $145.853m. One way to interpret this is that management expect borrowing interest rates to fall going forwards. Most of these hedges were taken out in November 2017, just prior to substantial acquisitions in Australia and the USA. At that time the NZ contract rate of 4%, the Australian contract swap rates of 3.4% and 3.2% and the US contract swap rate of 3.8% obviously looked good.
SNOOPY
Re-reading the Finaccess takeover offer the position on future growth has been mapped out, From page 8:
"Global Valar has confirmed to the independent directors that it does not currently intend to promote a change to Restaurant Brands dividend policy in the near term."
- That is the bit that made me think dividends would continue.- But continuing on reading:
"Global Valar has also stated that after completion of the offer the dividend policy will need to continue to be assessed against other capital requirements in the business on an ongoing basis, with Shareholder value from a dividend needing to be considered relative to the potential value creation from reinvesting the funds within the business."
The takeover document then goes on to talk about capital structure
"Global Valar has advised the Independent Directors that it does not intend to significantly lever Restaurant Brands (i.e. increase Restaurant Brands debt)"
and we learn
"Global Valor does not envisage any future equity capital being required from Restaurant Brands shareholders in the near to medium term, although any large-scale initiatives which are unable to be funded from from business cashflow would require an assessment of capital sources at the relevant time."
We then learn about another Global Valar subsidiary 'AmRest', another owner of restaurants:
"Finaccess Capital set a maximum target leverage ratio of 'Net Debt'/ EBITDA of 3.2x."
So what does all this tell us about 'Restaurant Brands' and the capital required for any acquisitions made from here? If we assume that a "Net Debt/EBITA" ratio of 3.2x applies here, we can start by looking at how this ratio stacks up now. I calculate EBITDA by taking EBIT before non-trading items and adding back 'Depreciation and Amortization'.
:
FY2018 FY2019 Bank Term Debt $166.815m $145.853m less Cash and Cash Equivalents ($10.410m) ($15.034m) equals Net Debt {A} $156.405m $130.819m Declared EBIT $63.182m $65.229m add Depreciation & Amortisation $29.599m $30.567m equals EBITDA {B} $92.781m $95.796m Net Debt/EBITDA {B} 1.69 1.37
We are well under that target figure of 3.2 for the Net/Debt EBITDA ratio. In fact from EOFY2019, the net debt can increase to:
$130.819 x (3.2 /1.37) = $305.563m with no more earnings before this self imposed covenant is breached.
If RBD persist with getting that mainland USA beachhead, then my guess is that a even a $US50m -$US100m purchase price for a turnaround business in mainland USA of marginal profitability will not worry the new board. They will be happy with such a post acquisition debt expanded balance sheet.
SNOOPY
Russel always did say RBD would be a 10 buck share
He's a guru that Russel - quite a few didn't believe him
Cool
Even Russel didn't believe it, because he agreed to 'on sell' most of his shares to 'Finaccess' at $9.45. Is Russel doing the right thing retaining the RBD shares he has left? One way is answer this question is to compare RBD with another company developing KFC and Pizza Hutt Restaurants around the Pacific rim, this time in the worlds most populated country: 'The People's Republic of China'. Some of you may have noticed that I have started a 'Yum China' (YUMC thread) on the Overseas Forum. i have pulled much of the YUMC comparative information below from that:
Restaurant Brands YUM China Share Price 19-08-2019 $10.20 $44.11 Normalised eps (last year) 33.8c $1.62 Historical PE (last year) 30 27 Forecast eps (this year) 36c (+6.5%) $1.72 (+7.5%) Forecast PE (this year) 28 26 Forecast dps (this year) 0c 48c Forecast Dividend Yield (this year) 0% 1.1% FIF Liability (this year) 0c (67c) ROE (last year) 18.8% 21.3% Incremental ROE (since 2016 capital raising) 9.7% 15% MDRT (last year) 3.7 years 0 years Net Profit Margin (last year) 5.1% 8.2% Brand Intellectual Property Owned None 'COFFii & JOY' (Starbucks challenger) and 'Little Sheep' (Hot Pot meals)
This table shows that RBD compares unfavourably on all measures, bar the FIF regime bill that applies to YUMC for those NZ investors subject to the FIF regime. For RBD: Lower dividend (actually none), higher PE ratio, lower forecast growth, lower returns from reinvested new capital, lower net profit margin and higher debt.
The forecasts for RBD are perhaps a little more uncertain, because it is only in the last couple of years that they have become 'overseas focussed'. It is therefore more uncertain just how successful they will be in the medium term with this new strategy. My 'Buffett Growth Model' is predicting a total return (including capital gain dividends and taxes) for YUMC of just under 7.4% per annum going forwards. RBD can't be evaluated using the 'Buffett Growth Model'. But, given the unfavourable comparative figures, we can reasonably look forward to a total return for RBD of somewhat less that 7.4% per annum going forwards.
Is RBD a good investment today? I have confidence in the direction of the company, and it seems to be executing their overseas expansion strategy in a satisfactory way. Nevertheless I am of the opinion that a forecast PE price of 28 is too high a price to pay. At today's prices I would favour YUMC as the better investment. But better is a 'relative term'. Personally I would be looking for a good dip in the market, before I would be willing to put more capital into either.
SNOOPY
Looks like the first Taco Bell to open soon in New Lynn. Based on job advert for an assistant manager.
KFC in the US are test marketing plant based chicken products, in partnership with one the years hottest floats 'Beyond Meat'.
https://finance.yahoo.com/news/kfc-i...120016030.html
This is a follow up project to the new meatless meatballs that are now be trialled at 'Subway'.
None of this has hit NZ yet of course. But since these new products are expected to attract a premium price, could this go some way to justifying the relative high value of takeaway restaurant companies not only in NZ, but worldwide?
I can see more potential for value at RBD too. When Russel finally decides to 'hang up his chicken wings' what about going for a plant based replacement? A triffid like being could easily be grown which incorporates the general style and appearance of Russel. It should be a much cheaper process than hiring a new CEO!
SNOOPY
Breaking News, friends - there's a new ridiculous KFC burger on the horizon - with donuts for buns. https://mashable.com/article/kfc-don...ontent=culture
People on Twitter do not care for my "completely wrong" opinion that this would taste terrible :) and it appears that there's a decent market for this if it were to launch here.
fried chicken, burgers and tacos - all doing good
not so much the pizza
Jeez Shareprice will be 12 bucks soon
Wasn’t long ago it reached 10 bucks .....amazing eh
All comparisons are with the equivalent quarter of the previous yearQuote:
Originally Posted by peat;771988
Restaurant Brands NZ YUM China Overall Sales Increase +3.5% +6.7% Increase in Store Numbers -6.6% +6.7% KFC Same Store Sales Increase +6.1% +5% Pizza Hutt Same Store Sales Increase -4.3% +1% Percentage of Delivery Sales (Carls) 8.9% Percentage of Delivery Sales (KFC) 18% Percentage of Delivery Sales (Pizza Hutt) 25% Share Price Increase 01-03-2019 to 30-08-2019 +16% +9.7%
RBD has done well, with the only two negative figures: the loss of stores over the year largely due to the sale of 'Starbucks' and the stalling Pizza Hutt same store sales. The annual RBD sales increase was only half that of YUMC. Meanwhile the share price appreciation for RBD over the last six months was twice that of YUMC. I don't think this makes sense. Relative to YUMC, RBD was overvalued a month ago and is even more overvalued now. I wonder if more deliveries for NZ customers via the likes of 'Uber Eats', will see that extra step growth that will be needed to justify the RBD share price above $11?
SNOOPY
Excellent interim.
'Profit' excluding non-trading items was $42.181m over FY2019. The associated earnings per share calculation is as follows::
2019: $42.181m /124.758m = 33.8cps
The information below is derived from Russel's AGM for FY2019 address.
In the half year FY2020 update Russell says:
"The Group expects to deliver a NPAT (excluding effect of NZ IFRS 16) for FY20 of at least 10% in excess of FY19"
So we are now talking an NPAT for FY2020 of:
$42.181m x 1.1 = $46.399m
HY 2020 profit already booked (excluding non-trading items and the effect of NZ IFRS 16) was $25m. So the profit in 2HY2020 needed to achieve our profit goal is:
$46.4m - $25.0m = $21.4m
That looks easily achievable, although I do expect the contribution from the start up operations of Taco Bell in Australia and New Zealand to be negative. Pizza Hutt profits in NZ plunging to an EBITDA of just $0.5m for the half, down 66% on the pcp is a worry though.
I concur. The historically high PE ratio I noted in a previous post looks a little more justified now that profit growth is forecast at 10%, up from 5-7% this year.
Profits will fall by probably $5.8m (2x the $2.9m half year profit fall) due to IFRS9 requirements though. So declared IFRS compliant profits for this year I expect will be lower:
$46.4m - $5.8m = $40.6m
Nevertheless, 'The market' doesn't seem too worried about this!
eps: $40.6m / 124.758m = 32.5cps
PER for 2020 based on Friday's $11.75 closing share price:
1175 / 32.5 = 36
That will require an eps growth rate of 36% between FY2020 and FY2021 to keep Percy happy! Heady days!
SNOOPY
Taco Bell opens it's first store in New Lynn Auckland today.
Any predictions for Taco Bell's impact on RBD's SP?
A couple of stores in NZ and Oz are not material to the RBD business. So the real effect will be the growth potential these early stores show as a portent to the potential opening of many more Taco Bell stores.
The nearest equivalent event I can think of was the rolling out of the Carl's Junior brand in NZ a few years ago. I recall customers queued out the doors and reports that is was the most successful launch of the Carls Junior brand in any new market to date. Yet a few years down the track, the roll out of new Carl's Junior stores has stopped, and it remains marginally profitable at EBITDA level. Put back the depreciation and allocate an appropriate percentage of head office expenses and one might argue Carl's Junior is not yet profitable.
I think the start up of Taco Bell in NZ and the reboot in Australia are a sop to master franchise holder YUM Brands, who also franchise KFC worldwide. I am not sure a down market Mexican food chain will gain any real traction outside of the Americas, and predict that Taco Bell will be a loss making distraction for RBD management in Australia and NZ, albeit a necessary one to keep YUM happy. However if by opening Taco Bell in Australasia, it allows RBD to continue on their international KFC expansion plans - where the real money is - then I will put up with it. It has all been well signalled so far, so I say no effect on the RBD share price
SNOOPY
Snoopy’s assessment of Taco Bell for RBD - bang on nail on
the head.
As for the long queues at the openings of all these new outlets - they all employ the same techniques to create the illusion of intense interest & demand. Yawn.
Tried out the new Taco Bell store yesterday. I shouldn’t have gone with such high expectations. The store itself looks nice (although the ‘bouncers’ limiting the number of patrons through felt a bit Sopranos), but the food was way over-priced for what you get. The Cali burrito was mostly just dough-wrap with a piddly amount of filling. The taco looked like an hors d’oeurve—I would have needed at least 4-5 to fill up a lunch.
I think RBD are going the wrong direction with this. They’re charging fancy prices, with fancy drinks (eventually), but the food isn’t fancy. It’s plain. I hope they either lower their prices and go for the true fast-food customers, or improve their food significantly (both in substance and in taste).
Thanks for your report Jonboyz. Out of curiosity I got on the net to have a look at the Taco Bell menus and pricing in Hawaii. For some reason I found myself blocked from accessing this information. Anyone else able to get into the official website? No matter, I found what I was after here:
https://1000menuprices.net/taco-bell...ces-in-hawaii/
The NZ menu can be found here:
https://static1.squarespace.com/stat...+Bell+Menu.pdf
Of course the menus are not exactly the same in NZ and Hawaii. But a comparison of 'like named' items is nevertheless telling:
Hawaii New Zealand Double Taco Supreme $US3.31/0.63= $5.35 $8.50 (basic) Double Taco Supreme Combo $US3.71/0.63= $5.89 $12.00 (basic) Grilled Stuft Burrito $US5.31/0.63= $8.43 (XXL) $8.99 (luxury) Chicken Queasdilla $US1.33/0.63= $2.11 (mini) $6.99 (basic) Soft Drink (Coke) $US1.98/0.63= $3.14 (480ml) $3.60 (420ml)
Those NZ prices include GST and the Hawaiian prices may not include sales tax. If someone can tell me the sales tax rate in Hawaii I will amend those US prices.
The prices don't look so different when converted into $NZ, except the 'basic' items look to cost less in the US. I think the niche for a new entrant in the Mexican food market is 'basic'. So I hope the strategy of trying to be 'mid market' when the product is 'anything but' will not backfire in NZ.
SNOOPY
You guys have put me off already, esp the bit about the size of the tacos
Think i’ll Stick to the local if Taco Bell ever come to Wellington
https://www.vivamexico.co.nz/product/flautas/
[QUOTE=winner69;778384]You guys have put me off already, esp the bit about the size of the tacos
From when have Cool Cats started having a sniff at tacos
If you were comparing disposable income basis, social/economic, you would look at dollar for dollar, Taco Bell in the US is budget. Hawaii is expensive for a US state and given the level of tourism. It's the place you go in the middle of the night en-route on a long road trip...starving is the prerequisite to enjoy the food, always drive through as the car park and around the restaurant is borderline dangerous. It food for the masses of working poor in the US, although I will say i actually like it:)
In dollar terms, $US3.31 (or $US3.44 including a 4% sales tax) for a 'Double Taco Supreme' in Hawaii and $NZ8.50 for what looks like the same thing in NZ is hardly egalitarian. Yet in wage terms, the minimum wages in Hawaii is currently $US10.10 per hour vs $NZ17.70 per hour in New Zealand. So if we calculate the number of 'Double Taco Supremes' that can be bought with the gross earnings of a minimum wage worker in an hour I get:
Hawaii: $US10.10 / $US3.44 = 2.94
New Zealand: $NZ17.70 / $US8.50 = 2.08
So as a rich country with high minimum wages, we aren't as badly off as just looking at those dollar prices alone might make you think. If Taco Bell has chosen not to aim for the 'low end' of the takeaway food market in NZ offering really cut prices it might be a smart move. There may not be enough poor people in Auckland to support a genuine US style Taco Bell?
My reasons for quoting Hawaiian prices were two fold:
1/ Both Hawaii and New Zealand are prime tourism destinations.
2/ Taco Bell is run in both countries by 'Restaurant Brands New Zealand'
I have never spent any time in Hawaii myself. However, on talking to someone who has I was told there is very much a two tier tourist market. You are either:
1/ a hotel customer or
2/ a tenter who gets up to decamp at the crack of dawn to avoid the state ranger coming around to collect the state camping ground fee.
There isn't much in between. So maybe your picture of Taco Bell in Hawaii as a 'crime scene in waiting' frequented by the desperate is not so far from the truth Raz?
SNOOPY
Hawaii is very different to New Zealand economic wise, it is a tourist destination however really a group of small Islands with a few defence bases. The poor half certainly live in what is more like an island back water. Think Fiji, inland basic houses with cheap apartments for the main workers in the main city of Waikiki. Min. wage means little when the majority of jobs are hospitality, priced on a tip based culture .
It is an outlier to other states within the US and except for RB Taco same ownership I would say a totally different economy to NZ. The concept is from the mainland USA where it is budget grub, how they sell it otherwise here is my question. Those prices mention in Hawaii are higher than what I pay, say in LA, from my experience. i get a meal of several item and drink for less than $5 US each when there. We are getting in NZ rather expensive for takeaways here so perhaps it is possible..
Not a good look
https://www.stuff.co.nz/national/117...and-harassment
Must say it is absolutely staggering after all the publicity in recent years of HOW NOT to handle sexual abuse cases (Catholic Church, Epstein, Weinstein, Kevin Spacey etc etc etc), RBD still appears to have no idea and no coherent procedures to deal with complaints.
Victimizing the victims twice at this day and age is simply unforgivable! As for promoting the abusers as reward seemingly for such behavior - beyond comprehension and totally repugnant.
"The man was subsequently promoted to supervisor. While the investigation was underway, the man was moved to another Restaurant Brands store and promoted again, this time to assistant manager.":t_down:
"The harassment and grooming ceased when the man transferred to another store, but started again when he came back to the Pizza Hut ... I found out a while later he was working at KFC - so he's still at Restaurant Brands.":t_down:
"The company refused to move her to another store, and initially refused to give her any leave, while Singh was stood down on full pay." :t_down:
https://www.thebalance.com/what-is-t...-index-1978992
the Big Mac index is always interesting.
I see the writer is Alison Mau, #MeTooNZ Reporter for Stuff.
If RBD thinks the CEO apology will shut this scandal down, I suspect they have a rude awakening ahead - there will be many more articles ahead as it's likely that other RBD staff members will come forward and tell their stories.
What happens when you hire the wrong HR people.
Chief NZ HR been in that role since mid 2018 but was doing serious HR work for them in year earlier
The Group Chief HR been around for zonks
So the people who mattered were around when the rape complaint was made.
And throughout this sorry saga Russel has been around.
RBD Board never had many female directors.
"All over again I was being treated like I was nothing. I meant nothing. It made me feel like coming forward was not the right thing to do."
Effectively she was raped again by the company. I am absolutely appalled. I just thought their food was a danger to your health. WOW, what an eye opener.
I hope Alison Mau takes an extremely dogged approach to reporting future issues with RBD.
Their culture looks extremely toxic to me.
Didn't I read at one point that all the RBD HR work has been centralised. Bureaucrats in Auckland deciding who they will employ in Christchurch without even meeting the prospective employee? All instituted under 'Our Russel' too!
Hmmm, it is looking like that knighthood for Russel is getting a little further away. What about a more h(andy)and appropriate honour like a princehood though? Then when Russel shows up to collect his award, take his 'prints' and throw him in the slammer!
SNOOPY
Uber Eats doing wonders for Carl’s
http://nzx-prod-s7fsd7f98s.s3-websit...073/314080.pdf
It will be interesting to see the effects on their margins. Burgerfuel have stayed away from Uber eats claiming it would grow their revenue but not their profit, so not worth their time. From their recent announcement:
" It has become clear that many restaurants that have engaged Uber Eats as a third-party sales and delivery channel have found the economics of this model to be largely unsustainable"
Have heard of a few restaurants ditch Uber eats in Auckland, yes revenue went up, but unless you are one of the bigger players and negotiate a more favourable commission, it becomes unprofitable. One guy closed due the foot traffic fell so much, but still doing about the same revenue wise (before commission payments) and was not making any money.
I would think RBD would have negotiated a lower payment.
Twenty Seven % increase.
Be interesting to see if they can manage such an increase.
As predicted :
https://www.stuff.co.nz/business/118...stores--survey
"Half of all Restaurant Brand workers who responded to a survey said they'd been personally affected or witness to sexual harassment at work."
Guess Russel is too busy with big deals & acquisitions overseas to get involved in trivial matters like sexual harassment in RBD's stores?
Cases going to court will give him and his HR people ongoing reminders in 2020.
Shareprice seems to be pumping along. Market says nothing to see here, no worries.
Not condoning behaviour at all but a few facts. From what I can see a loaded survey question to 9,000 current and ex employees got 168 responses (less than 2%). Of these according to the 'analysis' of the survey by Unite union and Ms Mau, ~50% had some form of concerns re sexual assault, i.e. ~84 or less than 1%. Now I'm not sure what the rate of sexual harassment is in the general working world (not that any is acceptable of course) but this doesn't seem to me to be a rate at RBD that deserves the tag of "Restaurant Brands was by far the worst - which appeared to be a "deep-rooted issue with its company culture".
It is quite possible that Stuff are targeting RBD for whatever reason, and that the culture at McDonalds, Pop and mom restaurant, et al is similar or worse.
Where there is smoke there is fire .... they may think they are sweeping it under the carpet but they are kicking the can down the road by not addressing it. I know of a young CHCH based KFC employee bragging she gets an extra $200 per week in her wages to bonk the boss ...at work!!!
Could be. There's a current article in the Atlantic Monthly called Why Kids Online Are Chasing ‘Clout’.
Basically it has become common for them to do or say whatever it takes for clout. Not new of course, but seems more pervasive among the young who live their lives in social media.
RBD has allowed the sexual harassment practices to go unchecked - until Stuff brought it to public attention.
Why would you refer to culture in other places like MacDonalds etc in response to very specific instances of not only sexual harassment but sexual assaults & even rape at RBD? There is no complaints at MacDonalds which we are aware of of or if there were, MacDonalds have dealt with so the victims did not feel victimized again and victims are not deterred from making complaints.
Shame on you, Blackcap for your insinuations.
The issue (like that of the sexual abuses at the Catholic Church) is not just that the sexual assaults and harassment took place, it is the way that RBD management dealt with it - blaming the victims, promoting & transferring the predators and treating the victims worse than the predators.
How many in the Roman Catholic Church do you think were involved in the abuse cases?
Agreed. There would appear to be similarities. Percentage wise the the offending rate was low in the Church as well. (not that the general public took much note of that)
Again, looking at the breakdown of the survey (according to the report), the numbers of poorly handled cases can't be high either, albeit 1 is 1 too many.
I am a little nervous of Stuff and Alison Mau. Note the #MeTooNZ is attributed as a "partnership" between Mau and Stuff.
All the more reason why big companies like RBD must act properly to set examples and standards for others to follow.
I worked for a company where any staff can complain to HR about any form of harassment and the complaint has to be and is investigated. I have seen action taken (extremely severe) against the perpetrators. Everyone in the company get the message very quickly.
Russell McVeagh is a good case in recent times of perpetrators losing their positions and reputations. Law firm parties are now rather tame.
We live in different times now - which is why it is astounding that RBD still involved itself in cover-ups and further victimization of the abused individuals!
I am not insinuating anything. I just feel that RBD for some reason have been targeted by Stuff (maybe they are the worst offender out there/or not or maybe they are the easiest target to bash) Sexual assault/abuse at work should never be tolerated and RBD need to front the issue. All I am saying is that other organisations whoever they may be probably have just as high a rate of said problem and for Stuffed to target RBD is a bit rich. They should be targeting all businesses to clean up their act.
I'm not really sure what you mean by "They should be targeting all businesses to clean up their act." Stuff would have limited resources so I'm not sure they could be expected to conduct an exhaustive search of all major businesses/organisations and publish a comparative analysis so as to not hurt the feelings of one particular entity. That said, if you read their section on #metoo (https://www.stuff.co.nz/national/me-too-nz) you will see that they have done investigations and commentary into RBD, Parliament, NZDF, NZ Cricket, TVNZ, etc. So it's not like they are crusading against only RBD.
Touching $14 again today and I am floored. With 125.758 million shares on issue, RBD is now a $1,760 billion company. It doesn't seem that long ago that our Russel set himself the goal of creating a $1b company. Now the valuation is nearer to twice that! An interesting twist to this ramp up in share price is that the 25% shares left as free float are now valued at $440m. This should be enough to allow RBD to stay within the NZX50. So much for waiting for the bots to sell down as RBD got tossed out of the NZX50. I don't think it is going to happen!
SNOOPY
discl: still holding my residual RBD