I bought Soup Restaurant on 4th May 2009
Rationale and Action
This is the first time I bought something not for investment, or rather, investment is not my primary concern. My wife like the food very much and I just came across its announcement on 30th April 2009 about Shareholder privilege card scheme, i.e.15% discount for shareholders with at least 2 lots.
Investment grade?
As for investment assessment, I have my reservations. Unless it have a strong franchise potential (which I can't see), I think it'll be like any other restaurant business that will have difficulty generating sufficient value above cost of capital for shareholders.
More on the card
To get the discount card, one need to fill a form to proof ownership of at least 2000 shares by disclosing ones' CDP account number. I presume they'll check it there. However, once I get hold of the discount card, I can't think of a way to verify I'm still a shareholder the next time I dine at Soup Restaurant. The staff at Soup Restaurant can't be checking with CDP everytime a customer produce that discount card right? So what is stopping anyone from buying 2 lots, get the card and sell it off?
Conclusion
This post is short. This blog is my diary so might as well pen this down for future reference. Anyway, I got hold of some 12 lots just in case Soup Restaurant proof me wrong and is able to create more value than I think possible. Look forward to my privilege card :)
Labels: My Actions
posted by Market Uncle at
22:39
5 Comments:
Interesting. A bargain hunter knows a bargain when he sees one.. :)
haha, thanks!
I am also thinking of becoming the shareholder just for the discount card. I like the garlic chicken very much. =) Cheers!
You mean the samsui chicken? Or is it another dish?
I have a website where I research stocks under five dollars. I have many years of experience with these type of stocks. I find that the best measurement of how undervalued a stock is is the price to sales ratio of a companies stock. The price to sales ratio is the market cap of a companies stock compared to the amount of sales the company does on an annual bases. A good example of a company with a low price to sales ratio is carrols restaurant group the company has a market cap of just 240 million dollars but does over 800 million dollars in annual sales the company is solidly profitable. In other words the price that the market is valuing the company at is 240 million dollars this is only about one fourth of what the company does in annual sales 800 million dollars. The stock currently trades at about 11 collars a share under the symbol {TAST} I think the stock could get to 55.00 dollars a share over the next five years. I base this on the current net profit margin of around 1.75% or 14 million dollars on sales of 800 hundred million dollars. If the companies sales were to increase by 50% or 400 million dollars to 1.2 billion dollars over the next five years. And if the companies net profit margin were to expand from 1.75% to 5% or 60 million dollars over the next five years. Than if the companies stock increased in price to where it was trading at a price earnings ratio of 20 this would put the stock at 55 dollars a share. This may seem to be a somewhat optimistic scenario but not really that much. There are many stocks that trade at much higher price earnings ratios when they become popular than 20 times earnings. I find that companies like carrols restaurant group are very rare. I also find that companies that have low price to sales ratios that are profitable or of decent quality tend to become takeover targets or get taken private by private equity firms or the management of the company or other companies in the same business. A good example of a popular stock with a very high price earnings ratios is whole foods market it trades at 35 times annual earnings. If anyone has any a question as of the validity of the information presented here a stock broker or financial planner or CPA that knows how to value stocks will confirm everything presented here.
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