1/16/2017

Real Estate Rich, Deep Value,Unloved


publicly traded restaurant company, Ruby Tuesday (RT). 





 




Ruby Tuesday a distressed restaurant chain founded in 1920. They own, run and franchise casual dining restaurants in 42 states and 14 foreign countries. As of November 29, 2016, Ruby Tuesday owns and operates 546, and franchised 67, Ruby Tuesday restaurants. 

On 08/11/16 announced a plan to close 95 Company owned restaurants. The plan streamlines the organization through asset rationalization, improve financial profitability, and create long-term value for shareholders. Restaurants closed during the first quarter of fiscal year 2017.  


There are countless reasons not to own this stock. Negative operating income every year since 2012. A less than exciting plan is the new healthy menu changes (salad bar improvements) to address the negative comps, improve brand image and key ingredient in the turnaround strategy. Management hints to traction with the new menu.  


My rationale for considering after further research is the Real Estate liquidation value. That alone is likely to support the current price of $2.24 (01/17/16) with options available to create shareholder value. Such as selling part of the real estate portfolio and focus on franchising. But these option are unlikely and make the stock at today's price of 2.20 risky. 


Per the 05/2016 10K; own land and buildings for 303 restaurants. The buildings with non-cancelable long-term land leases are 252 restaurants, and 91 restaurants with non-cancelable leases covering land and buildings. Restaurant Support Services Center in Maryville, Tennessee, opened in 1998. It comprises two office buildings owned by the Company.


Further, it seems plausible that future profitability achievable given the size of the enterprise (number of restaurants). A small improvement in check size and traffic translates easily into operating income.But management has done nothing to prove they have a viable turn around strategy. I still purchased a few shares at today's price of $2.20 and may purchase more on further weakness.


RT price performance for 24 weeks = -42.27%, 52Weeks = -56.25%,3yrAnnualized = -27.18%, 5yrAnnulaized = -20.49%,10yrAnnualized = -20.83%


Historically cheap based on EV/GP,EV/Revenue,P/TB, reducing shares outstanding














Positive insider activity 2016 and 2017





























































Current Statistics from Yahoo:
Market Cap 134.03M ,Enterprise Value  318.7M , Price/Book (mrq)  0.36
Enterprise Value/Revenue    0.31, Enterprise Value/EBITDA   6.70
Revenue (ttm)  1.02B , Revenue Per Share (ttm) 16.99
Quarterly Revenue Growth (yoy)  -17.70%
Gross Profit (ttm)   188.62M , EBITDA  47.6M
Total Cash (mrq) 38.56M ,Total Cash Per Share (mrq) 0.64
Total Debt (mrq)   223.24M ,Total Debt/Equity (mrq) 66.98
Current Ratio (mrq) 0.91 , Book Value Per Share (mrq) 6.23
Operating Cash Flow (ttm)  18.71M , Levered Free Cash Flow (ttm)    10.48M
52-Week Change  -60.18%,52 Week High  5.63 ,52 Week Low 2.08
% Held by Insiders   3.01% ,% Held by Institutions   88.70%
Short % of Float  5.95%

Long: RT

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