Restaurant Brands
Valuecruncher has placed a value of $1.43 per Restaurant Brands share, with a range of $0.77 to $2.12. The current share price is $1.09, which is in the lower range of the Valuecruncher range.
Revenue Growth
Revenue growth remained flat in the 05/06 period (0.122%), partially due to the unsuccessful operation in Victoria Australia. In previous years, growth has been closer to 3% (2.06% and 3.61% in the 03/04 and 04/05 periods, respectively). We have forecasted revenues growth to remain flat for the 06/07 period, and increasing back to 3% (also the terminal growth) in the 07/08 and 08/09 periods.
EBIT Margin
The EBIT margin for 2006 was also hampered by the unsuccessful division, sitting at 2.89%, compared with margins of 6.52%, 4.78% and 5.99% for years 03, 04, and 05, respectively. We have forecasted margins to return to 4% for 2007, 5% for 2008 and 6% for 2009 due to the sale of the Victoria division. Without this division, it is likely that margins will return to historical margins.
Terminal Growth
Terminal growth has been set at 3%
Discount Rate (WACC)
The discount rate used is 11%.
Commentary
With the sale of the unsuccessful Victoria, Australia section of the business it is likely that revenue growth and EBIT margins will improve, as management concentrate on the New Zealand divisions. The estimate that Valuecruncher has come up with takes into account these possible improvements. Valuecruncher can see why Restaurant Brands is a potential private equity target. Other market analysts share the same opinion.
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