MTY - MTY Food Group

[frommi]

I think it's useful to know the industry dynamics, the management's approach, who the competitors are, any potential regulatory problems on the horizon looks at the filings and transcripts, etc. But to each their own.

Ok maybe i exaggerated a bit, don`t know if it was just one hour, maybe two but surely not more.
In this case there was a writeup in Donville`s letter, an annual report/ letter,  one or two conference call transscripts, a VIC writeup and i think 2 or 3 SA articles. But you are right, to each his own.

[gary17]

I think the biggest risk to this business is if people stop going to shopping malls to eat

Gary

[notorious546]

I think the biggest risk to this business is if people stop going to shopping malls to eat
Gary

I think this is definitely a trend but i'm not too sure on how many of the company's locations are in lower quality malls which are likely to be hit the hardest.

If anyone has any datasets to share i'd be interested in seeing.

[ScottHall]

I haven't looked closely at this one, but I'm impressed at what they've managed to do.

The biggest concern that strikes out at me is that - at least recently - there are more franchisees shutting down than opening up. They've only grown store count recently from acquisitions.

On a related note, systemwide comps have been negative for quite a while. How many franchisees are just barely hanging on? Maybe these concepts are big in Canada, I have no idea, but a lot of them seem like they could be second or third tier ideas.

Franchise businesses can have great economics, just like this one does. But you often don't know how the underlying franchisees are doing, which is what the long term sustainability of such a business is based on. I haven't taken a close look at the filings to see if any of this is disclosed beyond what I just covered. Has anyone else?

The disclosed terms of the Coldstone deal seem pretty good for MTY. I'm not sure if the stock is cheap or not here, but it seems at least worth a closer look.

[notorious546]

http://business.financialpost.com/news/retail-marketing/cultures-thai-express-owner-mty-foods-set-to-double-in-size-with-acquisition-of-arizonas-kahala-chain

Although there is some risk involved in stepping into the U.S. market, Jesse Gamble, an associate portfolio manager at Donville Kent Asset Management, says the conservative nature of MTY’s management team makes him confident this is a well-planned decision.

“We’ve known something like this has been coming for a while … we understood that if they did a deal it would be the right deal and we trust in them,” said Gamble.

“This is just a game they have to play because they are a growth by acquisition company and as you get bigger, you have to do bigger deals.”

Following the news of the acquisition, MTY’s stock popped 16.48 per cent to $41.56 by 12:03 and even at these levels Gamble says the stock is undervalued as the company has now doubled its size and issued just 20 per cent equity.

“Based on simple numbers like this you know how much value this is going to create,” he said.

[Liberty]

I'm sorry, this is off-topic, but this associate portfolio manager is named Jesse Gamble? Talk about a name that probably doesn't project "conservative asset allocation" to the LPs

[mranski]

My guess is that Cold Stone Creamery itself is a struggling brand. They forced it into Tim Hortons a few years ago and then abandoned the concept.

[notorious546]

My guess is that Cold Stone Creamery itself is a struggling brand. They forced it into Tim Hortons a few years ago and then abandoned the concept.

why do you say forced? do you have any numbers that imply profitability for this chain?

[mranski]

By forced, I meant they physically squeezed them into the existing Tim Hortons layout. I don't have any numbers on the Stone Cold franchise.

[mranski]

Article below about Serruyas and acquired company Kahala brands in Forbes

http://www.forbes.com/sites/amyfeldman/2016/06/19/how-canadas-serruya-family-made-some-300-million-off-a-bunch-of-faded-food-service-brands/#34b772685513