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When it comes to investing in casual dining and fast food stocks, Spur and Famous Brands [JSE:FBR] often come first to mind for many investors. Admittedly, the two counters have paid their dues. They’ve returned to shareholders handsomely over the years and have tasty long-term prospects. But has anyone looked at Taste Holdings [JSE:TAS]? Yes, that AltX-listed franchise group counting Scooters Pizza, Maxis and NWJ among its brands.
Finweek’s followed Taste for the better part of the past few years. The share hardly trades and its price has been around 55c for most of that period. But last week it jumped by as much as 27% to close at 70c after the group posted its financial results for the year ended February. The results were reasonably strong. The group declared its maiden dividend of 3c after headline earnings per share grew 15% to10,7c.
There were questions when Taste diversified into jewellery in 2008. Its NWJ adventure is still evolving, making it hard to evaluate its impact on Taste’s shareholders. But no doubt NWJ is a good business, a great jewellery brand for the middle to lower income market. Group CEO Carlo Gonzaga says Taste is a management business – so there’re no conflict between fast food and jewellery.
Though such a business model may not appeal to conservative investors, the group looks efficiently managed. It remains committed to its original food business, having started a food services division to supply its retail brands. Last year it bought St Elmo’s, a pizza chain based in the Western Cape that’s now being repositioned as a sit-down Italian casual dining chain. In our opinion, Taste is one of the undervalued yet promising small caps on the AltX. At an earnings multiple of 6,5 times it’s a good bargain – way cheaper than Spur and Famous Brands.
Finweek’s followed Taste for the better part of the past few years. The share hardly trades and its price has been around 55c for most of that period. But last week it jumped by as much as 27% to close at 70c after the group posted its financial results for the year ended February. The results were reasonably strong. The group declared its maiden dividend of 3c after headline earnings per share grew 15% to10,7c.
There were questions when Taste diversified into jewellery in 2008. Its NWJ adventure is still evolving, making it hard to evaluate its impact on Taste’s shareholders. But no doubt NWJ is a good business, a great jewellery brand for the middle to lower income market. Group CEO Carlo Gonzaga says Taste is a management business – so there’re no conflict between fast food and jewellery.
Though such a business model may not appeal to conservative investors, the group looks efficiently managed. It remains committed to its original food business, having started a food services division to supply its retail brands. Last year it bought St Elmo’s, a pizza chain based in the Western Cape that’s now being repositioned as a sit-down Italian casual dining chain. In our opinion, Taste is one of the undervalued yet promising small caps on the AltX. At an earnings multiple of 6,5 times it’s a good bargain – way cheaper than Spur and Famous Brands.
