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Biglari Holdings Inc. Message Board

  • chrisnd01 chrisnd01 Feb 22, 2012 9:32 AM Flag

    Updated BH Valuation (It's cheaper)

    At the end of September, BH had cash and investments of $250 million. I'm using a normalized EBITDA of $80 million for the restaurant business. It's a little lower in the trailing 12 months, but it continues to show improvement. Plus, we'll have some franchsise growth in the quarters ahead.

    Using an 8x EBITDA multiple values the restaurants at $640 million. Subtract out the $115 million of debt and you arrive at an EV of $525 million for the restaurants.

    At the end of Sept, the portfolio was worth $250 mm. At that time, BH owned 2.3 million shares of CBRL valued around 40. It's now close to 58, so those shares have increased about $41 million in value. In addition, BH purchased another 1 million CBRL shares since. I haven't calculated the average price on those but I'll assume $50. There's another $8 million gain on those, increasing the value of the portfolio by about $50 million total, and that is before factoring in gains in the other smaller holdings.

    So, the amount of cash and investments is now $300+ million.

    Adding it all up: the restaurant business is worth $525 million, (after subtracting the $115 million in debt), the portfolio is worth at least $300 million portfolio and that gets you to an EV for BH of $825 million, or $589 per share.

    If you want to use a 7x EBITDA multiple then you arrive at a price of $532. A 6x multiple gets you to $475. The stock is currently placing around a 5x EBITDA multiple on the restaurants now. I think that is clearly too low. I listed current EBITDA multiples for some other restaurant stocks in a previous post. My view is that SNS is worth 8x given the continued improvement plus significant upside from franchising growth.

    This stock is going higher.

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