Research archive for FBR

Good news, Famous Brands results for the full year hit the screens yesterday morning. The same cycle over and over, the longer you do this, the more you get used to the fact that the company is going to report on the last Monday in May. These of course were for the full year to end 29 February - Famous Brands Reports Impressive 15th Consecutive Year Of Record Results. It is a pretty impressive track record and most especially against the backdrop of a consumer that was supposed to be under tremendous pressure. They are opening two stores a week here in South Africa, three a week across the group, and they refurbished four stores across the group per week of the financial year.

We had an announcement from Famous Brands this morning of a new brand added to their stable - Famous Brands Savours Greek Cuisine Acquisition - Advancing the Group's Presence in Evening Casual Dining Category. The casual dinning area is something that Famous Brands have been talking about for the last 18 months, it also allows them to spend some of the the R126 million cash sitting on their balance sheet. I think you can expect more acquisitions like this going forward. Referring to the consumer this is a key line from the announcement ""Mythos's target audience is upper-LSM consumers, a market segment which has consistently proved its resilience in the current weak economic conditions. The research derived from our other premium brands illustrates that customers with robust disposable income remain enthusiastic spenders."

Famous Brands released their interim results to end August 2015 yesterday, the market embraced the higher dividend and better revenues, the stock was up 3 percent by the close of trade. Revenues for the half increased a very healthy 27 percent to just shy of 2 billion Rand. Operating profits and Headline Earnings (241 cents) increased by "only" 14 percent. The dividend as we mentioned increased 23 percent to 190 cents, payable Monday 7 December. Famous Brands boosts your Xmas budget!

The second stock was Famous Brands, who will Acquire 51% of Retail Group (Pty) Ltd, Botswana. This is not a huge acquisition but it does give them more control of the operations in Botswana and more importantly it gives their (Famous Brands) huge amount of cash a place to work a bit harder. In their recent results they had R 126 million sitting in cash on the balance sheet.

One of our core holdings and one of my favourite companies (because their products taste so good) Famous Brands released their full year results this morning - Summarised Results For The Year Ended 28 February 2015. They had a solid year with revenue up 16% to R 3.3 billion (not huge in the grand scheme of things), HEPS up 15%, the dividend is up 18% and they added 258 new restaurants bringing the total to 2545.

Another note on that Famous Brands acquisition that was announced yesterday. I was asked a bunch of questions by a delightful journalist from Moneyweb, Sungula Nkabinde. It became clear to him that this business was all about logistics. Group revenue was 2.83 billion Rand. The supply chain segment accounts for 2.15 billion Rand. The rest of the business, the parts that you know better has the front end store presence, the royalties earned from the franchise owners sales. If they, being Famous Brands, can squeeze more out of the production and storage process, that has a huge impact on margins. The money is made in making the products that are then sold onwards to the franchise owners, making it clear that quality will be controlled. No matter where you eat that meat product, you can taste the "sameness" each and every time. That is what people want, the same taste across the country and in this case, across the world.

Last little bit of company news today, Famous Brands shares have rocketed to above 110 Rand a share again (more than that, as high as 115 ZAR), on the news that they are acquiring a stake (75 percent - controlling stake) in a business called Cater Chain Food Services, from a set of brothers John and Roy Tem-Tem. As per the Cater Chain website in the about us section, the company is a red meat production business, again as per their website capable of producing 400 tons of frozen, fresh and processed products each and every week. Wow. That is a lot of meat for the hungry. Latest technology, check it out -> Production plant. The SENS release says slightly different things, it says 900 tons of beef, lamb, mutton, chicken, bacon and ham. This is where you make the money, the storage space for burger patties, you can take a turn again on the same cheaper burger. Provided of course that the same burger is sold at the same price, to the end consumer. Great move, the market approves.

Famous Brands have released their interim numbers to August 2014 this morning. Revenue up 14 percent to 1.57 billion Rands (same store sales up 3.4 percent), operating profits up 19 percent to 303 million Rand, which all translates to headline earnings of 212 cents per share (up 18 percent) and the dividend up 19 percent to 155 cents. Very generous with their payments, remembering that this company is completely ungeared, very little debt. In fact they have a debt to equity ratio of a mere 2 percent, 25 million Rand in total, much criticism could be levelled at the team for have a "lazy balance sheet". It is not that the company is not afraid of taking the risks, they are trading under cautionary currently, it could be a sizeable acquisition, all that could change quickly. For that we will have to wait.

This morning we received an announcement from Famous Brands who have entered into another interesting and innovative deal.

Yesterday Famous Brands released their full year results, and had a results presentation that I got to attend. I was hoping to have a King Steer Burger as part of the snacks followed by a Tashas/Wakaberry desert, but that was not the case. The company had strong results with some mile stones over the year. The first and most important as an investor is that they achieved an operating margin of over 20% for the first time (from 18.5%), they also have passed the R10 billion market cap number and their debt to equity ratio is negative, meaning that they are debt free.

We continue to hear that the consumer is under pressure (I should have put that in inverted commas), but both casual dining companies Famous Brands and Taste Holdings released trading updates that seemed really good. Famous Brands said that they expect "to report headline earnings per share (HEPS) and earnings per share (EPS) (calculated on an IFRS basis) of between 402 cents per share and 410 cents per share. This is an improvement on the prior year comparable HEPS and EPS of between 19% and 21%. The group also expects to report diluted HEPS and diluted EPS of between 401 cents per share and 409 cents per share, an improvement of between 20% and 22%." The share price added over a percent to close at 108 Rand a share. Results are in two weeks time, EPS are expected to then be somewhere in the region of 482 cents, at 108 ZAR the stock trades on a 22.3 multiple, but growing at that rate means that the PEG ratio is around 1.1 times. You would prefer that to be under or closer to one, but still, the company continues to grow in this fast growing part of the economy. Darren Hele is a new appointment as CEO (Kevin Hedderwick is now Group CEO) and is a young fellow, by running listed business standards. He is 41 years old according to Bloomberg.

Over the past few days two recommended stocks, Famous Brands and Massmart have announced expansion plans outside of South Africa. It is one of the beautiful things about investing in equities, the world is sometimes your oyster. Companies can search for areas (on your behalf) where there is growth potential, they do the hard yards to get there and as an investor you benefit. Assuming of course that they get it right.

Famous Brands have announced a relatively small transaction this morning, but for many well to do Joburgers, Durbanites and Capetonians, even the lovely folks of Port Elizabeth and Bloemfontein will know the frozen yoghurt franchise Wakaberry. Frozen yoghurt is perceptually healthier and perhaps even tastier than Ice Cream. Depending of course on the size of the cup that you choose and depending of course on the toppings that you put on your frozen yoghurt, that may not be entirely true. I have been only once to the store in Lonehill and enjoyed it immensely, I can't say whether I felt better for having chosen the "healthier" option or not. Currently all food that falls in the "junk" category is banned from the menu, courtesy of my lent decisions. Sigh. Sad but true.

Famous Brands have released an important announcement this morning in which they will be acquiring 49 percent of UAC restaurants Limited from parent group, UAC of Nigeria Plc. Primarily for the Mr. Bigg's opportunity. Who? Mr. Bigg's, which is Nigeria's first franchise chain and has been around since the 1960's, according to their Wikipedia entry. The logo colours are Red and Yellow, yes, I have seen that before! Mr. Bigg's Wiki entry, which references UAC's website (which in turn references the Mr. Biggs website) has this to say about the menu: "Mr. Bigg's specialty is the meat pie. A common lunch might also include scotch eggs, a sugared donut, chicken, and a soft drink. While western fare such as hamburgers is served, Nigerian delicacies such as jollof rice and moin moin are more popular. Birthday cakes are also a popular product, and Mr. Bigg's bakery offers cakes and pastries."

If there is one business that has proven extremely resilient in this weaker consumer environment, it has been Famous Brands. The business released quarterly sales numbers for the period starting March to the end of May.