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Dave & Buster's, Inc. (DAB) Message Board

  • yahoo yahoo May 13, 2005 8:07 AM Flag

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    • Your assumption would be correct if DANB
      continues to spend the same percentage of cash flow on
      expansion going forward and same store sales stay flat
      (increase at the inflation rate). However, that same
      percentage will represent a huge increase in actual dollars
      precisely because expansion has not been financed with debt
      and thus will produce significant new earnings right
      out of the gate. Also, the impact of international
      licensing fees has been ignored in your roe assumptions. In
      short, don't sell DANB short. Any company that can keep
      producing new cash cows out of cash flow is extremely
      promising in my opinion.
      ss

      • 3 Replies to sprintsnail
      • Last quarter, DANB earned pretax 8 million
        dollars, ending the year with assets of 133 million.
        figuring four quarters forward at that same profit,
        without doing anything, we get 32 million profit, on
        equity of 133 or 24% ROE. However with uncle sam having
        taxes, maybe net profit is a better measure. 5.2 million
        last quater, forward one year gives 20.4 million
        profit on equity of 133 and we get a 15.6% ROE.


        Last year we ended with a value of 124 million after
        earning a profit of 14.3, or net profit of 8.9 million.
        This breaks down to a ROE of 11.5% or 7.1%
        ROE.


        I would say this is a big improvement and movement
        in the right direction, toward your 15% ROE and a
        reason to buy the stock.



        I said we
        earned 8 million last quarter on equity of 133 million,
        which was the year end total, the calculation might
        have been made on a 128 million (assets - net profit),
        and result in a higher ROE.

        They have proposed
        opening a new store every two months (on average) for the
        next three years, with no new debt. Personnally if
        they borrowed at 8% and invest with an ROE of 15% we
        can live on that 7% profitably.

        What I am
        trying to say, is that this is a good stock, and meets
        you ROE criteria. Additionally there was some
        accounting changes last year about opening cost deductions,
        which may have affected the above calculations.

      • Interesting situation. Same Store Sales are flat
        and will stay flat because as "Hedge_Trader" pointed
        out, Dave & Busters stores essentially operate at
        capacity.

        1) I live in Dallas. The one million
        residents have kept two Dave & Busters jammed-packed for
        the past 10 years.

        2) The evidence is on this
        board. Look at the past 2 months posts about any DANB
        location and you'll see comments such as, "opened to
        capacity crowds", "always full", etc. Bottom line: even
        new stores have little room for an increase in
        year-to-year sales.

        Same store comparisons will not
        impress a casual analyst who sees no growth and assumes
        they have hit the wall. Fact is, a store hits the wall
        almost as soon as it opens (assuming they don't want to
        gamble on losing customers by raising prices). That also
        means that every opening will probably be a home
        run.

        Future growth will be almost 100% based on new stores.
        They have 18 now. Their announcement today projects 6
        new stores this year (including the one already
        open), 7 next year, and 8 the year after that. The math
        is pretty simple.

    • I appreciate all the interesting comments. They
      are quite insightful.

      Danb says it takes about
      10 million to open a location. Does anybody know the
      specific amount of debt associated with a location? And
      how many years does it take for that location to pay
      itself off? ie 5 yrs?

      If locations are paid for
      in a relatively short time and interest rates are
      very low right now. Debt does not seem to be much of a
      concern.

 

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