Famous Brands ..my humble opinion..

[Vish_1]

I've done an analysis on this one based on a strategy I'm learning in USA at the moment. Come out with a future EPS growth of 25%. Extrapolated that to 10 years, at PE of 16 and come with a 10 year sticker price(value) of R149. Then worked retrospectively to current(with a minimum 15% rate of return), to a current sticker price of R36, which is way higher than current price.(therefore offering good value currently) If this company stays on current trends, its a very good buy..This is just my humble opinion. What do you guys think??? Any ideas??..

[ABuzz]

They have always done relatively well, no fireworks, but a good solid share. I have always liked food and beverage shares and long term most of them seem to do well, cos everybody's got to eat. My only concern with the group is that they don't have a chicken franchise in their portfolio. The burger market is very mature and so represents a pretty steady sector. The pizza market is growing, but is coming under increasing pressure as more players enter the market. Plus the volatility of input prices - mozarella has just gone from about R 33/kg to about R 53/kg. This is a nightmare when it is your most costly ingredient. Chicken in this country is still the number 1 best seller and because its a cheap meal will continue to grow over the next couple of years. So all said I don't see it as a radical flyer, but sure it could deliver some upside like you suggest.

[Brazen]

Geez Abuzz, you really are someone who knows the price of cheese. I hardly ever do small or mid caps but thorougly enjoy your posts - you put in the time and do the research. Keep it coming.

[Vish_1]

Thanks buddy. Speaking of chicken, any ideas if and when Nando's plans to list?

[SimonPB]

nando's recently left the market, so unlikely to return any time soon.

[#6]

Is that analysis also based on a qualitative analysis. SA has shown robust growth in the last 4 years with increasing diposable income from social grants, lower taxes and reduced unemployment. There has been an increasing middle class in this country, that have started to eat out more often and regularly. As the interest rates have increase in SA over the past couple of months the middle class wallets have become tighter. Fuel hikes, higher school fees, electricity cost to increase, high food inflation etc makes a tighter budget for the average man. 1)I like food counters as people have to eat. But the question is do they eat out or eat in in tightening times? 2)Goverment infra spend over the next 5 years will create more jobs and income. This should lend support to fast food co's volumes they sell 3)Increasing food inflation could tighten margins for Famous brand if they cannot pass costs on and lastly 4)If Woolies can increase their revenue with more convienince food sales so can Famous brand.