RFG - Retail Food Group

[ROE]

They also talk about possibility of acquisition, wonder if Bake Delight is up for sale I reckon they can buy that one off Private equity and has scale in fresh baking stream.

They got Brumbys may as well take Baker Delight .. I like both of them but I dont have too many brumbys where I live, I buy bread from Baker Delight I want dividend back

 

[ROE]

Surprise trading halt for capital raising ...what deals are they pulling now? I be happy with baker delight -

 

[Ves]

Surprise trading halt for capital raising ...what deals are they pulling now? I be happy with baker delight -

They might be fast-tracking the pizza business. Interesting that they'd raise capital to do that though...

 

[ROE]

Ok they intend to use money to roll out corporate stores and fire power for acquisition ...
Franchises stores you don't need the money as franchisee front up most of the cost.

Predict 15% NPAT grow. ...not bad ....

 

[Ves]

I have concerns with this SPP.... I dislike it when companies raise money (and increase the issued share count) without a concrete reason. Perhaps they do have an acquisition in the pipeline but without any details it's extremely hard for shareholders to make a logical decision on the profitability / growth from the eventual use of this money - which in a valuation sense makes it hard to see how it doesn't dilute the value of pre-existing shares until more details come to hand. I'd prefer them to use debt / cashflow in fast-tracking the QSR expansion / rollout.

I don't think I will take this SPP up at this price - at my hurdle rate the investment doesn't make sense. Fair enough that they've growth at a rate of knots, and probably will continue to do so, but everything has its price.

 

[Poonam]

Retail Food Group RFG Share purchase plan

RFG are offering shareholders the opportunity to purchase parcels of shares at $4.30 per share to finance continued expansion. The company has grown steadily over the past few years returning a dividend fy of about 19c in 2013.
I wonder if they have reached a peak with that price or will expansion continue?

 

[Ves]

I don't think I will take this SPP up at this price - at my hurdle rate the investment doesn't make sense. Fair enough that they've growth at a rate of knots, and probably will continue to do so, but everything has its price.

Hmmm turns out that when I added the post-SPP share count to my valuation I turned around and forgot to add the capital they raised ($60m) to my valuation. That's another $0.42 cents per share... which makes the offer more reasonable, but not super compelling.

 

[Poonam]

Hmmm turns out that when I added the post-SPP share count to my valuation I turned around and forgot to add the capital they raised ($60m) to my valuation. That's another $0.42 cents per share... which makes the offer more reasonable, but not super compelling.

I was thinking that it wasn't too bad. The offer provides a bit of a discount and the promise of growth is there.
I am looking at it as a stock that will continue to grow in the short to medium term, and the dividend is at about 4.5%.
I wasn't real rapped in the way they opened the offer up to institutions who had never invested previously in RFG and left the little shareholders with the scraps. They all seem to do that these days.

 

[ROE]

I was thinking that it wasn't too bad. The offer provides a bit of a discount and the promise of growth is there.
I am looking at it as a stock that will continue to grow in the short to medium term, and the dividend is at about 4.5%.
I wasn't real rapped in the way they opened the offer up to institutions who had never invested previously in RFG and left the little shareholders with the scraps. They all seem to do that these days.

If it was a deep discount yes small retail holder may get shafted but a small discount it's a right thing for them to offer to institution as the risk of retail investor not taking up if it trade too close to SPP price is high.

I don't take up the SPP when it is too close to trading price for all stock I hold...I prefer to time and buy it on market under the SPP if I can or worse case at SPP and pay brokerage...more flexibility here...costing extra couple hundred bucks doesnt bother me for long term holding when you spend ten of thousands on them...

I managed to pick up 25k for RFG at 4.25 ....

 

[ROE]

Help RFG spread the dividend love to Charity

http://www.rfgsweethearts.com.au/index.php?r=site/howitworks

 

[ROE]

decent result significant grow profile ahead ... so expect more and more dividend in coming years

 

[McLovin]

decent result significant grow profile ahead ... so expect more and more dividend in coming years

Where's the growth?


Last five years...
Basic EPS Growth 6.8% 0.4% 3.9% (1.5%) 1.9%

(this year would have been negative EPS growth where it not for the reduction in interest expense)

 

[ROE]

Where's the growth?


Last five years...
Basic EPS Growth 6.8% 0.4% 3.9% (1.5%) 1.9%

(this year would have been negative EPS growth where it not for the reduction in interest expense)

most of the dilution is in equity raising to buy bold on acquisition
when you have scale and the distribution network that when it start paying off and EPS earning start
to click up

I dont mind static earning while they build the network, it is hard to find business that provide reliable cash cow and dividend,

these business should be trading at premium even if there is little grow because you know what you get now and foreseeable future, where as other business it hard to predicts due to the nature of their earning... I place higher intrinsic value on business that offer me reliable cash cow I know i can trust

 

[McLovin]

most of the dilution is in equity raising to buy bold on acquisition
when you have scale and the distribution network that when it start paying off and EPS earning start
to click up

I appreciate the need to build scale, but to be fair, these guys have 1,434 stores. How much bigger do they need to get until they finally start to realise their economies of scale?

I dont mind static earning while they build the network, it is hard to find business that provide reliable cash cow and dividend,

these business should be trading at premium even if there is little grow because you know what you get now and foreseeable future, where as other business it hard to predicts due to the nature of their earning... I place higher intrinsic value on business that offer me reliable cash cow I know i can trust

The big issue for me is same store sales, or lack of, which even in their high growth brands (QSR) is only rising with the CPI. Compare that to DMP, which is much more saturated in the market (about double the number of pizza outlets), managing to grow SSS at 6.3%. There might be more that falls to the bottom line when/if they stop buying up businesses but to me it still looks like a low growth business. I need to dig a bit deeper though, especially the cash flow stmnt -- $140m odd invested in the last five years and OCF hasn't changed.

Always good to get your opinion though, ROE.

 

[TPI]

Now I have Pizza Capers, Crust and La Porchetta all within 5 mins drive of me so I can keep an eye on RFG's QSR category .

Last year I put an (unsuccessful) low ball offer on the La Porchetta head office/warehouse in Melbourne, it was part-owned by a couple of the franchise owners who wanted to sell and leaseback - oh well, could possibly have had RFG as my tenant!

 

[McLovin]

They're buying Gloria Jeans. $163.5m + $16.5 earnout. Funded by $100m in cash/debt. They're claiming EBIT for 2016 of $24m. Street Talk claims they were forecasting $11m EBIT for FY15 (and NPAT of $6m). There's no mention on how they plan to double EBIT.

I'd also be curious as to how they came up with an EV/EBIT multiple of 6.2-6.4x for 2016. It seems as though they've excluded milestone payments and the share based payment.

 

[Ves]

Street Talk claims they were forecasting $11m EBIT for FY15 (and NPAT of $6m). There's no mention on how they plan to double EBIT.

.

Are you referring to AFR / The Age? Because I find that they are often wrong. Company presentation says GJs was expected to make $21.5m. Maybe it's a typo?

Would be interested to know how much working capital is in the Gloria Jeans franchise system. EPS accretive is often cash-flow dilutive (see EAX latest results). They've been clever scaling up via acquisitions for the last 8 years, so hopefully it's as cheap as it looks (especially post synergies).

I really like vertical integration in their coffee businesses. Actually it is one of the things that attracted me to RFG in the first place.

 

[McLovin]

Are you referring to AFR / The Age? Because I find that they are often wrong. Company presentation says GJs was expected to make $21.5m. Maybe it's a typo?

Must have been. The prezzo wasn't up when I looked before but now it is. So that changes things a bit!

I really like vertical integration in their coffee businesses. Actually it is one of the things that attracted me to RFG in the first place.

Why's that? What are the benefits?

 

[Ves]

Why's that? What are the benefits?

My understanding is that by having access to their own wholesale coffee & production facilities not only can they sell to suppliers & other businesses, but they can lock in production capacity / asset utilisation in these operations by cross-selling through their franchise network. The wholesale coffee & production segment isn't the greatest business in the world, but it looks like it is de-risked substantially by the franchise networks, and provides diversification via a complementary revenue stream.

They have a pretty strong bargaining position over their franchisees & are good at making agreements that enhance profitability, so it would be hard to say "No we don't want to purchase the coffee from you."

 

[pinkboy]

Good to see you back Ves.


pinkboy