Urban Dining - Freddy's growing appetite

In a nutshell, URB (over)paid £31m for 24 Tootsies last year, mainly financed with a placing of 49m shares @60p. The shares rarely trade, presumably because most of the equity is with institutions who view it as a long term hold, and the share price has drifted back to around 40p. The last statement committed the company to opening 8 new units in the near future and other self financed expansion plans. There is negligable debt and shareholders coming in now are paying £718k per (assuming there are now soon to be 32 units) Tootsies instead of the £1.29m the placees paid last year.

Tootsies is an established mid market brand, but imho nothing special to offer. In Belsize Park their unit sits between an exciting hamburger concept unit and Pizza Express, it was the least busy last night. On the other hand it is difficult to see anything wrong with brokers estimates of around 3.8 for the current year and 5p of earnings for the year ending Jan 2007. It is possible that a weakly differentiated mid market concept could suffer in the present consumer slow-down, but this should be weighed against the expansionist and entrepreneurial talents of the management.

All in all it seems a fair bet at these levels over a two year period (10% cgt for AIM)