The GOOD -Due Diligence for Investors in PF Hospitality Group
We have linked below, the company press release announcing that the Company has partnered with iconic restaurateurs, Sub-Culture Restaurant Group. PF Hospitality Group will hold 51% of Shaker & Pie, while Sub-Culture maintains 49%. The Update to shareholders listed below is a statement by CEO Vaughan Dugan regarding the company’s future. The form 10-12G, also linked below, details the company merger with Pizza Fusion this past July and gives investors a detailed look into all aspects of the company.
Our View: The acquisition / reverse merger with PF Hospitality Group (PFHS) and Pizza Fusion which has 16 locations internationally and opening new concept locations now has thrust PFHS into the limelight. Not only are they franchising in the US, they already have an international presence. The new venture into the Shaker & Pie concept of pizza/Italian food space may provide a better revenue stream per location in the long run.
The natural/organic approach to pizza is a novel and interesting idea. Most Americans seem to like pizza as there are tens of thousands of pizza parlors nationwide. Today, pizza is considered an unhealthy and delicious food; it will be interesting to see if Pizza Fusion will create a buzz about a healthier and delicious pizza. The company has also indicated its interest in developing brands it believes can be successful, not limiting themselves to the businesses they are already in.
The company has 60 million shares outstanding but the public float for PFHS is under 100k shares tradeable. The low number of available shares should create a unique opportunity for investors to get some of that float. PFHS is at that point where revenues could ramp up quickly. Should that happen the current price would be a bargain.
PFHS – Press Release – October 28, 2015
PFHS – Form 10-12G – October 1, 2015
PFHS – Update to Shareholders – August 31, 2015
The BAD – Due Diligence for Investors in Chanticleer Holdings
We have linked a company press release below that announces another cash payout from their Hooter America Investment bringing this year’s total to $543,000 thus far. The recent form 8-K reviews the company’s potential asset acquisitions in Australia. The Taglich Brothers report, also linked below, is a comprehensive report on HOTR.
Our View: HOTR seems to be growing by leaps and bounds. As of this writing they have 430 Hooters restaurants and 33 other restaurants. We believe their future growth will be in the Burger Joint restaurants. The potential growth, domestically, for Hooters may have reached a saturation point.
HOTR needs to find a way to profitability. They have been able to ramp their revenue up to $10 million but suffer from a high cost of sales. The Taglich report we have listed projects a share price of $4.65 in the next 12 months based on a projected 44% increase in revenue. Even if those assumptions turn out to be true, the gross margin will have to improve to reach profitability.
If you read the Taglich Brothers and find the analysis sound then today’s price of $1.05 per share should be a bargain.
HOTR – Press Release – October 26, 2015
HOTR – Form 8-K – October 14, 2015
Taglich Brothers – Howard Halpern – August 31, 2015
The UGLY – Due Diligence for Investors in El Pollo Loco Holdings
We linked a company press release below announcing the opening of two new locations in California. The J.D. Singh article listed below summates opinions of the analysts covering LOCO. The three analysts all have a buy rating on the company and the article cites revenue growth from existing stores rather than expansion in the near term. The Khang & Khang press release is one of many from law firms seeking to file class action suits against LOCO for issuing misleading financial information.
Our View: LOCO has 415 EL Pollo Loco stores, mostly located west of the Rocky Mountains. They have a lot of the country yet to explore. The company began as a very successful private enterprise and has continued its success as a public company since 2014. The market for grilled chicken in a quick food setting will continue to grow. The days of fried chicken’s dominance are over and LOCO is filling that void.
LOCO is a profitable company listing net income of $7.2 million in the most recent quarter ended July 1, 2015. The potential for litigation against the company is unfortunate, but the company immediately announced a Q3 earnings call for November 13th. It may have just been a coincidence. Profits can assuage many complaints that investors may have.
Many restaurant stocks have taken a hit on their share price since May. LOCO is just one of many and its disgruntled shareholders may just have to wait until restaurant stocks are back on the fast track.
LOCO – Press Release – October 28, 2015
Benzinga – J.D. Singh – October 8, 2015
Khang & Khang LLP – Press Release – October 20, 2015
GOOD and BAD – Due Diligence for Investors in Del Taco Restaurants
The Reuters article linked below is an edited transcript of the company’s earnings call for the third quarter 2015.The Street article discusses a secondary common stock offering priced at $12.00 per share.
The Benzinga article cites analyst’s opinion, based on the company’s Q3 performance that indicates a price target of $20.
Our View: Our favorite line about Del Taco, written by a blogger, is “The tacos are tasty. And they don’t seem to give me ‘problems’ like Taco Bell does.” TACO seems to be outperforming the analyst’s estimates and continuing its pattern of growth. They are rated “buy” “outperform” everywhere we look.
The good news for Taco is that their Del Taco restaurants have room for plenty of growth through menu expansion. A couple of new and popular products could greatly accelerate their already consistent growth.
The restaurant industry has taken a hit in share price over the past 5-6 months and many of them are at their lowest prices now. If we had to pick a stock in that space to appreciate in the short and long term it would probably be TACO.
The Street – Amanda Shaiva – October 27, 2015
Benzinga – Jim Swanson – October 20, 2015
Thomas Reuters Streetevents – TACO Earnings Call Transcript – October 20, 2015
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