Friday's close price of FRS virtually made everyone who purchased this stock a loser for the past 12 months.
Let's dig out how much FRS is worth of by very conservative methods.
This company essentially consists of two parts, from investment point of view: the restaurant business and real estate business.
While those two business are integral parts of this company, I want those who are holding this company to know that what you are really holding.
First, how much are its real estate holdings?
This company is holding over 100 real estates, including restaurant properties, the commissary properties, among others.
Under the current highly depressed real estate environment, if all of those properties are sold at cost, which is about $173 million (Land and improvements plus Buildings in the latest balance sheet). Except for the properties acquired between 2007 and 2008, which is not many, the predominant properties was acquired many years or decades ago. I think total selling price should be much higher than $173 million.
If calculated by the latest selling price, the four restaurants were sold for over $2 million capital gains. Remember, they are sold at the depth of real estate crisis, and three of them are small volume restaurants, which led to substantially less capital gains. Even using this information as benchmark for its whole property holdings, the net gain should be well over $50 million above its stated book value.
I am going to throw away the business for free. The net liquidated real estate value alone should amount to $30 or more per share for current share holders. Since the restaurant business is very dependable and profitable business, this business should bring negative price to its real estate value.
From earning front, the last quarter's earning miss are due to its higher than expected 7 cents self-insurance charge and 2 cents higher tax. Excluding those factors, the earning should be equal to or higher than the analyst's forecast.
Speculating on next quarter, I do think we would be likely to meet or beat the analyst's forecast. The earning should be out any time soon.
Seems this is an excellent chance the acquire this baby stock.
I wasn't even considering the real estate. This company is pretty cheap on an EPS and cash flow basis in it's own right. I've been accumulating the last couple days between $20/$21. I assume I must be missing something, given how much all the other restaurant stocks have rallied and this one has been left behind. They even pay a nice dividend while you wait...