Restaurant Share Discussion Threads

[philanderer] 30/10/2018 17:57

Plenty of comment here..

BE
The plan is to pay 13 times operating earnings for a restaurant chain that's mostly high street and has spent its life in PE ownership.

BE
Funded my a ma-hoosive rights issue and a load of debt.

11:17 am
BE
And a divi cut, though you had to read the statement pretty closely to notice it.

[sharw] 30/10/2018 17:09

No ? needed Typo. Consensus for current year eps is 20.1p so if met that means total dividend 10.05p compared to the 17.4p maintained for the last couple of years.

[typo56] 30/10/2018 16:32

i.e., reducing the dividend yield?

[philanderer] 30/10/2018 16:14

from the RNS..

Dividends

"The Board believes that, following Completion, it is appropriate for the Enlarged Group to adopt a policy of paying a dividend covered two times by earnings before exceptional items. This dividend policy will be reflected in the final dividend that the Company declares relating to TRG FY 2018."

[thecroots] 30/10/2018 15:14

Poor deal...

[sharw] 30/10/2018 15:11

At 260p the EV of RTN is £545.6m giving an EV/sales ratio of 0.81. However, Wagamana is being bought for an EV/sales ratio of 1.82.

I sold my last tranche of RTN earlier this year and this does not tempt me back in.

[philanderer] 30/10/2018 13:46

Russ Mould, investment director at AJ Bell, said the deal looks to be a "brave move" on Restaurant Group's part given the saturation of the casual dining market and an "iffy consumer outlook".

"Growth is about more than getting bigger and while the deal would add a little under 200 new restaurants to its 509-strong portfolio, there have to be serious question marks over the scope to expand Wagamama – even if it is a successful operator," said Mould.

[profitaker] 30/10/2018 11:55

The statutory accounts lodged at Companies House for Mabel Topco Limited (holding Co of Wagamama) makes for interesting reading !

Year to April 2017 (ok, it's 18 months old) operating profit £22m, interest payable £30m, pre-tax loss £8m.

Balance sheet shows total assets of £273m (£276m are stated in today's RNS), total liabilities of £390m giving net liabilites of £117m.

Dogs dinner springs to mind !

[profitaker] 30/10/2018 11:15

JakNife

The 8.7 multiple is a function of acquisition cost (£357m), not the enterprise value (acquisition cost + net debt). £357m / 8.7 gives EBITDA of £41m.

From the announcement:

"Wagamama reported revenue of GBP306.7 million (2017: GBP266.1 million) and generated EBITDA after pre-opening costs of GBP43.0 million(11) (2017: GBP42.5 million(12)"

The slight difference of £2m in EBITDA obtained from the multiple (I'm guessing) could be attributed to cost of acquisition.

[philanderer] 30/10/2018 10:25

Reaction:

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[porsche1945] 30/10/2018 10:01

i need to stop investing in UK dross, the country and most of the ftse uninvestable. Recession, brexit, worthless currency, everything on the slide. They could have bought this pos in a couple of years from the liquidators for pennies. you now either get diluted or blackmailed into buying more of this capital destructive sxxt. Never touch private equity, see debenhams as worst case example closely followed by AA.

[essentialinvestor] 30/10/2018 09:59

Very surprised.

Increases the risk profile of the group imv.

[profitaker] 30/10/2018 09:13

Wagamama enterprise value of £559m with 138 directly operated outlets valuing each unit at £4m (no idea what the franchises are worth). Paying 8.7 x EBITDA. Taking on Wagamama net debt of £202m and increasing RTN debt by £42m to part fund the acquisition. Asking shareholders to stump up another half of their shareholding by value. It's a big ask and not a compelling acquisition by any stretch of the imagination in the current environment.

I was lucky to get out at £2.67

It's a shame, I like the business. Might buy back in at a lower price and certainly will if the deal is called off. Good luck to all holders.

[hampton58] 30/10/2018 09:12

They are basically doing a Private Equity valued take over You got 15% immediate upside and then the PE boys will move in

[typo56] 30/10/2018 08:55

Smells of empire building and creating significant value for directors!

[jrlomax] 30/10/2018 08:51

If this deal was intended to help the share price, do us a favour and scrub it.

[montyhedge] 30/10/2018 08:47

Can't stand Wagamama, you have to sit on a bench next to annoying customers.

[typo56] 30/10/2018 08:36

Rights potentially 3 for 4 at 210p? Should know soon.

As Profitaker says, it doesn't matter much. The 'discount' is probably determined by the underwriting.

[typo56] 30/10/2018 08:22

They're raising £315m (before costs?) but paying cash of £357m. So no extra for working capital. The opposite.

It's a big throw of the dice.

[profitaker] 30/10/2018 08:19

Quite a mild reaction to the cash call it seems (-4%).

JakNife - The detail of the rights isn't there but it doesn't really matter. They're looking to raise £315m and with 201m shares in issue that equates to a cash call of (315/201) £1.57 per share.

[typo56] 30/10/2018 08:12

You're right JakNike. No rights details yet.

Rights issues are a blag. They con PIs. Don't get sucked in by the 'discount' shares. Look at ENQ. Looks at SMDS.

[adobbing] 30/10/2018 07:50

A nice way to solve the Frankie and Bennies and Chiquito problem. Convert to a popular brand that people will actually want to visit.