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Bobbyaxelrod. Good analysis of comptoire peers. I jumped in here looking for a covid recovery play I didn't cash out on the rise because I came to the same conclusion re scope for expansion, plenty of room. I didnt appreciate how few Lebanese restaurants there are in the UK.
Hope the following is useful.
The IFRS accounting with the leases and right-of-use assets makes their balance sheet much worse, but yes they have implied their position when negotiating with landlords is strong, and said they have renegotiated a lot of leases onto lower rents/turnover based rents and exited other leases. I think when you excluded the lease related items their balance sheet is not in bad shape. Looking at their market cap of 6.75m: at the last interims 9.1m cash (with a 2.7m increase in payables) and 7.4m PPE against 3m in borrowings.
I would be interested in them expanding via franchises too, although we do not know the exact terms of these, I'd imagine the cost control side of things is more efficiently managed by an appropriately motivated franchisee. Comptoir Group already have a centralised facility from which to service their franchises. This solves the structural problem with the restaurant industry of costs rising (e.g. staffing) when times are good, then subsequently being too high when times are bad.
For the 5 years 2016-2020 they had an average adjusted EBITDA of £3m per year. I usually don't like seeing "aEBITDA", but I think their definition of it is somewhat fair, and closely matches their operating cash flows. Even a 10x multiple assuming no growth would give a market cap of £30m, or nearly 5x today.
For some perspective on the possible growth:
Nandos 450 restaurants in the UK, Toby Carvery 150, Miller & Carter >100, Bill’s 78, TGI Fridays 80, Wagamama 149, Slug and Lettuce 70, Harvester 220, Zizzi 130, Prezzo 207. Nandos makes a £40m loss on £1bn revenue. Wagamama bought for £560m; they have 6x the number of Comptoir Group restaurants, 560/6=£93m, then you can further discount the £93m to allow for stronger Wagamama brand and you still end up way north of £6.75m current market cap. There is around 160 total Lebanese restaurants in the UK at present.
Also, the Kaye family is behind Prezzo, Ask and Zizzi and invested £4.7m in the Comptoir Group IPO (around 10% of company). Jonathan Kaye was founder and CEO of Prezzo and listed in 2002 at a market cap of £9.1m, later selling to PG capital in 2015 for £304m. He grew Prezzo 13 year period to over 207 restaurants (also included Chimichanga 39 units).
So, I think much of the poor performance is related to the poor liquidity (the shares are very tightly held with a small free float). I think the directors hold too much. For example in the last week there have been 6 days with almost no trade as far as I can see. Hopefully the poor liquidity works both ways and this ends up flying. The other restaurants like Restaurant Group, Fulham Sore, etc, have not performed as badly as Comptoir Group.
Most importantly, the food, general offering, atmosphere and culture in Comptoir is excellent.
Trading below cash balance in the interims. Admittedly trade payables did increase with the cash balance. What opportunities have come about due to covid/ cheap leases? Please no more central london restaurants for now the place is a ghost town. Focus on the cities and larger towns outside of the capital. Increasing revenue on takeaways is key to growing revenue. Maiden profit!
What are you thinking they will update? Seems stupidly undervalued, but low liquidity has worked against it. My holding gets especially hurt by the spread. I will probably do another review at some point - I felt confident when I looked at it deeply so chances are I will add. For 6m you get 20-30 restaurants, generating each over 1m turnover in normal year, with some cash. Most of their liabilities are lease related, which has hurt how the balance sheet looks. Just surprised that the value here has gone under looked (although I am willing to concede that I may be completely wrong here!)
Not a word since the interim results in September. A trading update is required.