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RFG - Retail Food Group

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galumay said:
I know its a bit OT, but do you guys have a reasonable DDM spreadsheet you are prepared to share? I have downloaded a couple but they are not the best to work with! I have tried making my own but i think my excel skills are not up to it!
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All the generic spreadsheet models you could ever want, all with open formula.

http://people.stern.nyu.edu/adamodar/New_Home_Page/spreadsh.htm

The specific DDM model you are asking for is ddmst.xls – “Stable growth, dividend discount model; best suited for firms growing at the same rate as the economy and paying residual cash as dividends.”

Actually the site just about covers anything you could ever want to know about valuation and it’s all for free – unfortunately there is so much there that it probably overwhelms most people.

My opinion though is that study in this area has a high payoff.


Edit.

V - as my kids would say JINX.
 
By profitability are you talking about a metric such as return on invested capital?

Can I check the maths? Capital invested (or payout ratio in your s/sheet) x return on capital = growth

So where Capital invested is X.

X x 5% = 3%

X = 3% / 5% = 60%

So they can afford to payout 40% of earnings if they want to grow earnings by 3% in the next year.

$0.34 x 40% = $0.136 (which is the same as what you have under this scenario in year 6 under 5% profitability).

Obviously theory and practice are different... but I like to try to understand the maths.
 

Yep - Spot on.

for 17% : (1-growth/ROI) = (1-3%/17%) = 82.35% of earnings is sustainable dividend at 3% growth rate. .8235 * earnings of 34cents = 28 cents sustainable dividend. (all other things being equal – which they seldom are)
 
craft said:
Yep - Spot on.

for 17% : (1-growth/ROI) = (1-3%/17%) = 82.35% of earnings is sustainable dividend at 3% growth rate. .8235 * earnings of 34cents = 28 cents sustainable dividend. (all other things being equal – which they seldom are)
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Thank you for the confirmation!

Yes - there are a small number of high quality businesses that manage to be able to source interest-free leverage that they can earn high returns on.

I think you mentioned one on the previous page. The maths for those situations is much more complicated (and mostly beyond me).
 
Thanks for the link Craft & Vespupria. I really enjoy your discussions as well! I am really trying to get a handle on this business of valuing shares before i put my money into the market. Its discussions like yours around RFG that help me - and scare the s*** out of me - because I am not sure I can ever really understand all the inputs and formulas required to get to a fair valuation!
 
galumay said:
I am not sure I can ever really understand all the inputs and formulas required to get to a fair valuation!
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Keep in mind that there is no such thing as an accurate 'fair valuation' and each model is going to have various assumptions and inputs. In fact you could have different models coming up with different fair values and have them both proven correct at some point by the market. Or they could be 'wrong' but market movements still prove them correct (if that makes sense).

The discussion on this thread has been great.
 
prawn_86 said:
Keep in mind that there is no such thing as an accurate 'fair valuation' and each model is going to have various assumptions and inputs.
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Yes, I am beginning to think that if the little bit i have learned, prevents me from buying total dogs then I will have a great advantage in investing straight up - and i may well be happy with a system that does no more than that!
 
galumay said:
Yes, I am beginning to think that if the little bit i have learned, prevents me from buying total dogs then I will have a great advantage in investing straight up - and i may well be happy with a system that does no more than that!
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Yep. Avoiding the dogs is the BIGGEST step in my opinion. It instantly raiseses performance above the majority. The next step is to proceed slowly, not to try and jump at every half decent opportunity (something I have been guilty of).

As soon as I started on my path to where I am now, I virtually instantly flipped my results and have been profitable ever since.
I know I have jumped further in practice than I have in knowledge -but I am now working to close that gap. With that I hope to improve my risk adjusted returns.

Kinda off topic now, but it is relevant in the sense that RFG is not a dog stock
 
An outstanding breakout today.

Not much volume, but a very good break from a nice pattern.
 
The reason volume was low was because the sellers dried up.
Check the selling depth after close - it is like a barren desert!
 
Bit quiet for a month now and RFG; like Mr Market; has been a bit shaky. Today's close of $3.30 represents a grossed up yield of 8%; with hefty interest cover.

I've always liked this co but felt it was getting away from me. Perhaps now is a good time to sniff around again? Not too expensive on the P/E ratio

Thoughts?
 
Keep calm and accumulate that all I can say
Value emerge in times like these for many quality business -
 
did we all keep calm and accumulate during the last panic when it was low $3 ?
Profit up 11%, Dividend up 14% ...predicting 15% grow next year...

Where are all the doubter of Dominos pizza and Coffee drinker?
 
ROE said:
did we all keep calm and accumulate during the last panic when it was low $3 ?
Profit up 11%, Dividend up 14% ...predicting 15% grow next year...

Where are all the doubter of Dominos pizza and Coffee drinker?
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Still happily holding and collecting dividends. Low $3 mark was fairly good buying, but I missed out the last time unfortunately, but certainly didn't sell.

edit: my average cost is about $2.70.

This isn't badly priced at the moment if they can meet their growth targets. I will need to look at my spreadsheet, but the result was a bit softer than I thought, but not by much.
 
I await a suitable entry, its been on my watch list all along, but I have not been watching long enough to pick up in one of the dips. My opportunity will come in good time.
 
Ves said:
This isn't badly priced at the moment if they can meet their growth targets. I will need to look at my spreadsheet, but the result was a bit softer than I thought, but not by much.
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I think people are too hung up chasing earning forecast and price stock price to forecast perfection
to me seriously if they grow 11% or 14% doesn't really matter as long as they grow, keep up with inflation.

people buy expecting 20% grow or what ever the figure....then when the business doesn't delivered they get disappointed.

why set the bar high and have a high probability of failing rather setting a low bar and has all the possibility of exceeding...

I like to buy business when the market price for absolutely no growth...you have every chance exceeding your expectation
 
Looking at the accounts more closely now that I am home. A few trends to note in the 2013 accounts (which are most likely be a result of Crust Pizza and Pizza Capers acquisitions):

Advertising & Marketing expenses up to 21.5% of revenue vs a long run average of around 17%. However, EBIT margin is still 37.5% vs long-run average of about 35% since listing. However the EBIT margin was down from the all-time high of 40.8% in 2012. 2013 total was $30.3m vs 19.3m in the prior corresponding period of 2012. That is a big additional investment.

Selling expenses show a very similar trend. 9.1% in 2013 vs average of 4-5% historically.

I would expect that this extra investment in awareness of the business is a result of them really ramping up their rollout and expansion of the Crust and Pizza Capers and will probably increase whilst project QSR400 is still running.

The new Pizza businesses seem to be a lot more working capital intensive. At least at the moment. It will be interesting to see how much they can tighten the reins once expansion has slowed down.

Working capital as a percentage of total sales and revenue is now 9.8% (although down from 11.9% last year). Generally has been much closer to 6% in the past. To be fair, there has only been an additional $5.6m investment in working capital since 30 June 2011.

Result overall is pretty clean, probably a bit of fat in there that you could reasonably take out and get a higher profit figure.... and definitely no red flags.
 

Pretty much agree. WC is running on the higher side because of where the business is in its cycle. They're really rolling out that pizza business at a lightning speed (37 new stores excluding the acquisition). There's obviously a bit of chasing Dominos tail going on too. Interesting company. I'm happy to sit on the side and continue watching.
 
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