The Shares Researcher

Over a bit more than two years ago, while the world was still “normal”, Pizza Pizza Royalty Corp was discussed on this blog. After a quick dip and the reduction of the dividend, the company has rebounded strongly. Although generally higher recent volatility, Pizza Pizza’s stock price increased further, supported by good news to increase the dividend and solid operational progress. The stock price has come close to fair value and especially due to the big drop of many other stocks, it seems like there may be better ways to deploy capital and this position can be reduced or sold altogether. Compared to the stock price in January 2020, a capital gain of C$3.45 and dividends of C$1.47 per share resulted in a total gross return of 49%! Current Price C$13.42

Intro This entry constitutes a novelty – so far, all entries have been about a specific stock, while this post is about an attractively priced bond with an excellent risk reward situation (and why not profit from it?). The Canadian company that issued this bond is Alaris Royalty, a highly diversified royalty firm with the majority of its assets in the US. Alaris’ business model is to advance money to companies and in return receives a percentage of the investees revenues – in other words, Alaris sits in the capital structure between the equity holders and banks, a form of hybrid capital. Hence, companies requiring money usually have one of the following needs: growth capital, partial liquidity, recapitalisation or for a management buyout (MBO). Alaris has been public since 2008 and currently holds royalty interests in 16 partners.   Valuation Alaris is only as strong as the weakest link in the chain, its royalty partners – if they are able to make their royalty pay...

Intro The Corona crisis has led and will likely lead further to some pretty decent buying opportunities with a beneficial risk/reward relation. Today, I will present you a company I have already been following for some years yet always considered it too expensive – a fact that has changed now with the drop in its share price. K-Bro Linen is the largest provider of laundry and linen services in Canada, and one of the largest in the UK. According to its own website, K-Bro has an international reputation for excellence and dependability in providing the most highly efficient, environmentally conscious and cost-effective laundry and linen services. The contracts with is clients are typically multi year contracts and provide not only visibility but also stable and recurring revenues. Sounds boring, right? That’s exactly how long-term investing works. K-Bro’s business can be divided into two parts: services for healthcare and hospitality. Of its total revenue of C$252 million in 2019...

Intro Pizza Pizza Royalty Corp owns certain trademarks and trade names in its franchise-oriented restaurant businesses operated primarily in Canada. Of the more than 700 restaurants, the majority is franchised, where Pizza Pizza Royalty Corp earns royalty income equal to 6% of the sales of Pizza Pizza restaurants and 9% of the Pizza 73 restaurants In short, a part of the sales (i.e. system sales) generated in the Pizza Pizza and Pizza 73 restaurants has to be shared with Pizza Pizza Royalty Corp – sounds confusing because there is just too many times the word pizza involved yet the methodology is fairly simple. Thus, an important driver is the ‘same store sales growth’ or SSSG which is, simplified, the organic growth rate of the restaurant portfolio. Annual SSSG was increasing yearly by roughly 1% to 3% from 2011 to 2016. Starting in 2017, however, this trend has been slightly negative and seems to be a key factor of the current opportunity the share price offers. Valuation ...

Intro Swiss Water Decaf is a company I have been following for a few years – they have made significant progress culminating in the completion of a new, bigger facility at the end of 2019. Swiss Water Decaf, as the name suggests, is a Canadian producer of decaffeinated coffee, using its SWISS WATER® Process to decaffeinate green coffee without the use of chemicals. The processed coffee is then sold to more than 50 countries, of which the lion’s share of the production goes to the USA, followed by Canada. With the opening of a new European subsidiary in January 2019, the company is now also selling its specialty coffee overseas. Total volumes shipped increased by 16% in the first 9 months of 2019, 11% in 2018 and 5% in 2017. Due to additional capacity coming from the new facility, new geographical markets and a consolidation of the decaf market, it is expected that volume trends continue to perform nicely. Valuation Swiss Water Decaf is a hidden gem with a market capitaliz...