The goal was to examine companies over 40 years public. Then, discover material real estate
holdings on the books below fair market value. Several companies did pass this test comparing enterprise value to land, buildings and improvements. As a
result this idea was worth sharing, restaurateur Luby’s (LUB). It’s not only real
estate rich. Even more important, Luby’s is a highly fixable opportunity to leverage
its diverse assets.
Luby’s founded in 1947 is multi branded
restaurant and contract food services company. Brands include Luby’s Cafeteria,
Fuddruckers, Cheeseburger in Paradise and Luby’s Culinary Contract Services. In
addition brands are Luby’s, Etc., Koo Koo Roo Chicken Bistro (“Koo Koo Roo”)
and Bob Luby’s Seafood.
Restaurants, 181 are owned and operated as
of February 2014. The 181 restaurants are grouped as follows, traditional
cafeterias 94 , gourmet hamburger 66, casual dining /bars 19, one upscale fast
serve chicken restaurant and one seafood restaurant. Furthermore as of February
2014, 22 Culinary Contract Services facilities were in operation. These
facilities service healthcare, higher education and corporate dining clients in
Texas and Louisiana. Lastly, Luby’s (LUB) is a franchisor for 114 franchised
Fuddruckers restaurants. The owners of these franchise units pay royalty
revenue.
The stock trades at a discount to historical and industry valuations using P/B, P/S, P/Tangible Book. Current book value per share is 6.13 versus the average 2009 to 2013 value of 5.97. Price to tangible book value is 1 versus the 2010 to 2013 average balance of 1.12.Moreover, management has skin in the game, 29.85% held by insiders. Capital structure is favorable, share count stable for years.
Real Estate;
Luby’s Inc owns land and buildings of 70 Luby’s
cafeteria, 16 Fuddruckers restaurants. Five of these restaurant properties
contain excess building space or an extra building, occupied by 10 tenants
unaffiliated with Luby’s, Inc. Three owned properties are planned to develop
for future use. Additionally, five owned other-use properties, one used as a
bake shop supporting baked products for restaurants. Also,one location is leased to
third party tenants and three leased to Fuddruckers franchisees.
For further analysis I took restaurant stocks with market capitalization
from 100M to 2,500M. The final list totaled 52. A few things stood out within the
group of 52. Luby’s (LUB) is 45% off its 52 week high of $9.19, ranking as the
second largest drop from the 52 week high. This indicates an oversold stock. In
addition , LUB ranked as follows; top 10 for 5 year revenue growth, first for worst YTD performance,
fourth for lowest P/S valuation, fifth for largest percentage owned by insiders.
Note the price performance, price to sales and book are near two year low.
Positive insider activity
Current price = $4.94 (05/07/14)
Market Cap: 140.80M ,Enterprise Value: 184.07M
Price/Sales (ttm): 0.36 , Price/Book (mrq): 0.82
Enterprise Value/Revenue: 0.46
Enterprise Value/EBITDA (ttm): 8.82
Revenue (ttm):
400.27M , Revenue Per Share (ttm): 13.92
Qtrly Revenue Growth (yoy): 2.90%
Gross Profit (ttm): 248.95M , EBITDA (ttm): 20.86M
Shares Outstanding: 28.39M ,Float: 18.09M
% Held by Insiders: 29.85% ,% Held by Institutions: 46.40%
Short % of Float: 1.90%
Note: Small Long Position in LUB
