Australian (ASX) Stock Market Forum

RFG - Retail Food Group

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Muschu said:
There is considerable discussion on another forum suggesting very significant shorting by UBS, a major investor.
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Shorts don't seem to have changed a great deal in the past month. If UBS was going hard shorting then perhaps someone else was covering.
http://www.shortman.com.au/stock?q=RFG

I didn't look at RFG's report in great detail, but on first glance it appeared in line with expectations. One of the key issues in the past for RFG was putting certain costs into the "one-off" bucket which the market doesn't always agree. That seems to be absent in the last 2 reports. The downward share price movement really only lasted 3 days with ~10m volume. So perhaps a holder took the opportunity to reduce/exit their exposure. I wouldn't be too concerned on that alone, provided that you did your homework on the latest report.

One key thing about RFG is that it has a portfolio of franchise brands. It is a roll-out as much as a roll-up model. So even though some of the same store sales growth looks pretty low, they can still roll out more stores thanks to cheap capital from would-be franchisees. However,
I also think that RFG will continue to roll its portfolio of brands. There's a fair bit of what's trendy/fashionable in the fast service food industry. Certain brands will mature and stabilise... and some might shrink and become a drag. RFG will need to be careful about how they manage these changes. Every now and then they are likely need a bit of cost to rejuvenate a brand, or close down underperforming ones. The management will call them one-off's but the market knows that they are more like costs that are on 3-5 year cycles.

Lastly, there's a bit of negative headwinds in the franchising industry - wage increases, wage frauds etc. So it might turn some investor away, or turn some would-be franchisees away and actually impact the business.
 
he last point is what I am worrying about. I reduced my holdings by half and am expecting some announcement in this field. the franchising industry appears very corrupt at present. The latest findings related to Dominos just shows what it's like. There may be little or nothing though as RFG seem to have very good management and most of their businesses don't run on the smell of an oily rag like 7-11 and Dominos.
 
Knobby22 said:
he last point is what I am worrying about. I reduced my holdings by half and am expecting some announcement in this field. the franchising industry appears very corrupt at present. The latest findings related to Dominos just shows what it's like. There may be little or nothing though as RFG seem to have very good management and most of their businesses don't run on the smell of an oily rag like 7-11 and Dominos.
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Well yesterday RFG hit $5.13 and UBS is in and out of being a substantial holder on a very frequent basis.... On a stock that has plummeted since announcing a record profit and increased dividend.

I don't really understand shorting but know that some think it a great vehicle to make money [at the expense of the small investor].

Surely this can only go so far and be permitted to go so far?
 
Muschu said:
I don't really understand shorting but know that some think it a great vehicle to make money [at the expense of the small investor].

Surely this can only go so far and be permitted to go so far?
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Shorting only makes money at the expense of the small investor when the small investor makes poor decisions - just like going long makes money at the expense of small investors.

Shorting actually has some stabilising effects on markets in times of severe distress.

I dont believe there is any need for controls or limits on short selling beyond those that exist now.
 
galumay said:
Shorting only makes money at the expense of the small investor when the small investor makes poor decisions - just like going long makes money at the expense of small investors.

Shorting actually has some stabilising effects on markets in times of severe distress.

I dont believe there is any need for controls or limits on short selling beyond those that exist now.
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So small investors are expected to anticipate shorting? Anyone on ASF never made a "poor decision"?
There are many other factors at play here imo.... I have frequently bought well performing stocks with strong fundamentals.... And not had this happen.

Of course people win and others lose - nature of the game. But manipulation by big players is quite different.
 
Muschu said:
So small investors are expected to anticipate shorting? Anyone on ASF never made a "poor decision"?
There are many other factors at play here imo.... I have frequently bought well performing stocks with strong fundamentals.... And not had this happen.

Of course people win and others lose - nature of the game. But manipulation by big players is quite different.
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So small investors are expected to anticipate shorting? Anyone on ASF never made a "poor decision"?
No, but investors are expected to know that volatility in price is a given. Find me one company that has had a constant increase in share price, without volatility.


Anyone on ASF never made a "poor decision"?
I've made plenty. So have others. I really don't think this is what Galumay is getting at.


But manipulation by big players is quite different.
Manipulation is often quoted as the reason for the change in share price, but it's likely not the case.

What if a larger holder, say a fund manager, has had a large amount of redemptions and they need to sell some holdings? So they sell on market, and the price changes. There are so many factors that can impact the price, and this is but one example.

I can't speak for traders, but as an investor, all I'm looking at is the amount of cash that is generated and when. The price eventually follows (up or down), and these small changes in price don't matter.
 
I'm not stressed about RFG and do accept volatility but see manipulation rather differently.

I also get what you are saying about the fund manager "need". Does this explain why UBS are in and out of being a major investor, so many times recently, as indicated by RFG announcements?
 
Muschu said:
I'm not stressed about RFG and do accept volatility but see manipulation rather differently.

I also get what you are saying about the fund manager "need". Does this explain why UBS are in and out of being a major investor, so many times recently, as indicated by RFG announcements?
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Having done some work for UBS' custody and registry provider, I can honestly say that the left hand doesn't know what the right hand is doing.
They have a fair few funds, and could be selling down in one and buying in the other. It sounds silly, but it happens - alot.

It's hardly manipulation, just the result of each fund adjusting its weighting in the company so they can hug the index to an appropriate level.


A little off topic, but the part that rubs me the wrong way is when one fund buys another, and each is charging a percentage of Assets under management along the way. Multiple commissions for nothing.
 
Muschu said:
I'm not stressed about RFG and do accept volatility but see manipulation rather differently.

I also get what you are saying about the fund manager "need". Does this explain why UBS are in and out of being a major investor, so many times recently, as indicated by RFG announcements?
Click to expand...

Manipulation is manipulation, shorting is shorting. A shorter may be manipulating, just as a buyer may be trying the manipulate the share price. Take a look at the short's interest chart of the last 3 years for RFG. You can see that sometimes the shorters get it wrong (like Jan 2016), sometimes the shorters get it right.

http://www.shortman.com.au/stock?q=RFG

Klogg said:
Having done some work for UBS' custody and registry provider, I can honestly say that the left hand doesn't know what the right hand is doing.
They have a fair few funds, and could be selling down in one and buying in the other. It sounds silly, but it happens - alot.

It's hardly manipulation, just the result of each fund adjusting its weighting in the company so they can hug the index to an appropriate level.

A little off topic, but the part that rubs me the wrong way is when one fund buys another, and each is charging a percentage of Assets under management along the way. Multiple commissions for nothing.
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Interesting... I didn't know you work for/at/with UBS?! I've always thought that UBS is a prime broker and it holds stock on behalf of various clients/instos so not all transactions are their own decision. Plus they lend out stocks which get returned from time to time, thereby changing their holding %. Please correct me if I am wrong.

With respect to funds owned by the same umbrella playing pass-the-parcel... it's a bit of a joke I agree. Macquarie used to be quite good at those. I also think that it creates an artificial valuation perception in the market... so next thing you know a completely independent 3rd party would buy an asset at similar valuations, thereby validating all the previous internal transactions.
 
Certainly agree that Klogg's post is interesting... I've not sold RFG but hoping the readjustment [bit of semantics here] will end soon.

Words are so interesting... I have a close relative who is extremely rich [hundred of millions] and into creating "inter-generational wealth" [meaning for his very immediate family]... I'd say excessively wealthy to the point where money is life's key purpose... However apparently the preferred term is "high end wealth"... :)
 
skc said:
Interesting... I didn't know you work for/at/with UBS?! I've always thought that UBS is a prime broker and it holds stock on behalf of various clients/instos so not all transactions are their own decision. Plus they lend out stocks which get returned from time to time, thereby changing their holding %. Please correct me if I am wrong.

With respect to funds owned by the same umbrella playing pass-the-parcel... it's a bit of a joke I agree. Macquarie used to be quite good at those. I also think that it creates an artificial valuation perception in the market... so next thing you know a completely independent 3rd party would buy an asset at similar valuations, thereby validating all the previous internal transactions.
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UBSGAM use NAB's Asset Servicing division for their custody and registry services. (Renewed the contract a few years ago):
http://www.theinstoreport.com.au/articles/ubsgam-extends-nab-asset-servicing-contract

I worked there (Asset Servicing) for a long while - sadly on a project to upgrade their unit registry software which did not go well. Years of software and infrastructure design down the drain because of bad vendor agreements...

After that project went bad, I moved on to other work. Then they announced that OneVue were taking over their unit registry, which did not surprise me at all. Low margin business that was largely manual (killing economies of scale) finally reached its inevitable death.


"I've always thought that UBS is a prime broker and it holds stock on behalf of various clients/instos so not all transactions are their own decision."

It takes positions on behalf of clients, but I believe it must go through a 3rd party (custodian) for regulatory reasons.


"Plus they lend out stocks which get returned from time to time, thereby changing their holding %. Please correct me if I am wrong."

100% right on this one.
 
Trading under 5.10 today, closing in on a new 52 week low, 5 year chart shows a lot of price action around the 4.40 mark, closing in on the bottom trend line as well.
~
RFG5.JPG
 
I sold half a month ago and since have bought them back at present prices.
I can't see them dropping much more.
 
skc said:
I didn't look at RFG's report in great detail, but on first glance it appeared in line with expectations. One of the key issues in the past for RFG was putting certain costs into the "one-off" bucket which the market doesn't always agree. That seems to be absent in the last 2 reports. The downward share price movement really only lasted 3 days with ~10m volume. So perhaps a holder took the opportunity to reduce/exit their exposure. I wouldn't be too concerned on that alone, provided that you did your homework on the latest report.

One key thing about RFG is that it has a portfolio of franchise brands. It is a roll-out as much as a roll-up model. So even though some of the same store sales growth looks pretty low, they can still roll out more stores thanks to cheap capital from would-be franchisees. However,

Lastly, there's a bit of negative headwinds in the franchising industry - wage increases, wage frauds etc. So it might turn some investor away, or turn some would-be franchisees away and actually impact the business.
Click to expand...

Here's the profit downgrade... and back to the old trick of one-off writedowns. $22m marketing investment written off...
 
AR released today, not the best of outcomes, coffee didnt perform as well as I expected and overall there isnt much going on if you strip out the acquisitions so Hudson will have to provide some levered advantage to the organic growth going forward.

I will probably stay invested, but I think it has to be watched carefully.
 
I really do not like the management and directors of RFG, they seem overly promotional.

They keep focusing on underlying earnings (and also EBITDA) as if the restructuring, re-branding and acquisition costs they incur almost every year (or so it seems) are not a normal cost of doing business!

The reported earnings are usually worse than the "underlying earnings" for RFG.

They forecast "underlying earnings growth of 6% for FY2018. I wonder how much the official/reported earnings growth will turn out to be? Even if they hit 6%, given all the risks and empire building going on its hardly enough to compensate for all the risks. They are trying to mask a deterioration in underlying performance through acquisitions and aggressive store roll outs. I think its a stock to be avoided.
 
rfg is going to get smashed again monday:
http://www.theage.com.au/business/r...ustralias-franchise-king-20171207-h00lbl.html

after experiencing first hand how hard franchise can be, I can't believe I bought into RFG. Our family used to run a Nando's and let me tell you, all the stories in that article were our experience. Adele has been on a mission the past couple of years, I also hope she investigates Nando's because it's daylight robbery.
 

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