may 2017 company presentation : shakey’s … pizza asia...pizza hut, 34.6% california pizza...
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Shakey’s Pizza Asia Ventures, Inc.(PSE: PIZZA)
COMPANY PRESENTATION :
May 2017
The Prieto
family
became
the master
franchisor
in the
Philippines
Acquired
Shakey’s
trademark
for the
Philippines
in
perpetuity
Established
commissary
Acquired
Shakey’s
trademark
for Middle
East, Asia
(ex Japan,
Malaysia)
including
China ,
Australia
and New
Zealand in
perpetuity
1975 2016 20172006
System-
wide
stores
reached
100
184 system-
wide stores
(end-2016)
Estimated 204
stores by
end-2017
1987
First store
in the
Philippines
1999 2009 2014
Century
Pacific Group
(CPGI) and
Arran (GIC)
acquired
control
2
Shakey’s has 40 and counting years
of brand legacy
Summary of Investment Highlights
Market Leadership*
Scalable Business
Model
Experienced
Management
• Dominates the full service pizza chain market with 58% market share
• 27% market share in the full service (pizza and non-pizza) category -
#1 in that space as well
• Multiple sales channels and store formats; Simple operations
• Low upfront cost and strong cash generation lead to shorter store-
level payback periods compared to industry
• Extensive track records in food and restaurant operations
• Entry of Century Pacific Group as strong and committed shareholders;
Provides synergies with other food businesses
Brand Strength &
Ownership
• Well-loved brand with more than 40 years of history in the Philippines
• Iconic products served in a distinct store environment
• No royalty payments, plus additional revenues from franchising
1
2
3
4
Industry Leading
Financials
• Superior profitability and margins versus peers
• Gearing levels improved post prepayment of debt c/o IPO proceeds
• Cash generative with a negative cash conversion cycle5
*Euromonitor 20153
Investment Highlights
Pizza Hut, 16.0%
Max's, 11.8%
Pancake House, 6.0%
Gerry's Grill, 5.0%
Kenny Rogers,
4.8%
Others, 29.6%
Pizza Hut, 34.6%
California Pizza
Kitchen, 2.7%
Papa John's, 2.4%
Others, 2.6%
#1 Pizza Chain and #1 Full Service Restaurant in the PH
Shakey’s dominates the
full service pizza chain
market by value since
2011 until present.
1
Full Service Pizza Chain
A 2015 market study
showed that close to 50%
of the total full service
restaurant market by value
is dominated by pizza
players.
Chained Full Service Restaurant
The full service pizza chain market is dominated by Shakey’s.
Source: Euromonitor 2015 Report
Pizza Chain
Greenwich, 24.3%
Pizza Hut,
23.0%
Yellow Cab, 7.6%
Lots' a Pizza, 4.4%
Sbarro, 3.7% Others,
8.5%
Domino's Pizza, 1.3%
27.2%
Shakey’s is the leading
pizza chain in the
Philippines by value with
27.2% market share,
trumping Greenwich and
Pizza Hut.
26.7%57.7%
5
Pizza
World famous thin crust and hand tossed
pizzas with many different choices
Wholesome combos
Combination of different signature
products offered by Shakey’s
Chicken and Mojos
Signature dish - fried chicken paired with
Shakey’s famous mojos(a)
Family meals
Value for money combination of pizza,
chicken, mojos and beverage
Pasta
Hearty pasta with a wide range of sauces
and toppings paired with garlic bread
Desserts
Wide range of after-meal desserts
Starters
Ranging from fries, mojos, squid rings,
chips and chicken
Soup and Salad
Extensive choice of soup and salad for
health-conscious customers
Bundled offerings catering to families and groups
Differentiated menu with iconic products
Strong and well established brand2
Shakey’s offers a differentiated menu with iconic and well-loved products.
(a) thinly-sliced potatoes coated with Shakey’s breading and fried to a golden brown perfection6
• No royalty payments, leading to shorter payback period and sustainably higher margins vs peers
• Revenue from licensing fees and royalties from franchisees
• Freedom to execute and react faster to market changes
• Opportunity for expansion into international markets
Strong and well established brand2
Beautiful and distinct store environment is Shakey’s offering to every customer;
Shakey’s has full control and ownership of its brand.
Brand ownership means: 2016 Philippine Top Brands:
Restaurant
Category: Brand:
2
Source: Asia’s Top 1000 Brands Survey by Campaign Asia, in partnership with Nielsen Company 77
Others, 15%
Dine-in, 61%
Delivery, 24%Dine-in
• Most popular sales channel due to unique family
and friends experience
• Aim to “WOW the guest”
Delivery
• Delivery available nationwide
• Single delivery hotline number (77-777) for Metro
Manila and adjacent areas; can be used
nationwide by 2H 2017
Carryout
• Convenient and fast method of sales
Functions
• Legacy and free standing stores have function
rooms for events such as parties and company
gatherings
Online sales
• Active online and mobile presence with own
website and mobile app
• http://www.shakeyspizza.ph
Supercards
• A very popular paid loyalty card
• PHP 499 – annual fee
(a) Includes carryout, catering and functions
Supercards benefits include:
• A birthday pizza treat
• Buy 1 Take 1 pizza promotion for delivery
• 10% off on dine-in or carryout purchases
• SuperPoints (1 point for every Php100
spent) for dine-in or carryout purchases
Systemwide sales split by channel
(Q1 2017)
(a)
Proven and scalable business model Strong and well established brand3
Multiple sales channels provide convenience and accessibility to Shakey’s customers.
8
9
Legacy storesFree standing
stores
Strip mall
storesMall stores Others
Typical store
footprint
(sqm)400 300 - 350 200 - 250 120 - 250 120 - 180
# of system-wide
stores as of
Q1 20179 67 29 73 11
% to total
system-wide
stores5% 35% 15% 39% 6%
Proven and scalable business model3
Shakey’s multiple store formats allows for market and expansion flexibility.
9
Proven and scalable business model3
• Firmly positioned in the fast casual segment (A, B and upper C market) that delivers high margins, good volumes, and scale
• Benefitting from key consumer trends – eating out more and upgrading from fast food to casual dining
Brand positioning
• Own commissary for proprietary raw materials protects key supply chain and maintains consistency and control over quality
• Economies of scale and purchasing synergy
Vertical integration
• Long-term leases for store locations at attractive rentals
• Presence of standalone stores (i.e. those outside malls) lead to low rent-to-sales ratio
Asset light approach
• Business model and strong discipline leads to typical payback period of 3-4 years
• Low upfront cost and strong cash generation per store
Short payback period
Proven and scalable business model3
Shakey’s is a well-established brand, while operating on an asset light model.
1010
Vicente L. Gregorio, President & Chief Executive Officer (Age: 51)
• Over 30 years of successful experience in the food business
• Started career in the first ever Shakey’s branch in the Philippines
• Key driver of Shakey’s brand strategy, organisation culture, core values and mission since 2003
• Proven management and leadership track record in foodservice retail set-up, expansion and turnaround management
Manuel Del Barrio, Vice-President & Chief Financial Officer (Age: 53)
• Previously the Assistant Vice-President for Finance of Century Pacific Food Inc. (CNPF) and Pacific Meat, Inc.
• Worked in accounting positions at several leading companies
Jorge Ma. Q. Concepcion, General Manager (Shakey’s Philippines) (Age: 61)
• Over 30 years of experience in consumer related business
• Significant experience in the US foodservice industry for about 10 years in numerous managerial positions
Alois Brielbeck, General Manager (Commissary) (Age: 56)
• Over 30 years of experience in the foodservice business
• Moved to Asia in 1986, taking up positions in pastry kitchens in Hong Kong and Tokyo
• Moved to the Philippines in 2000 as Chief Operating Officer for Culinary Systems Specialists Incorporated
• Appointed as Bakemasters General Manager in 2005
Joseph A. Remsa, Consultant – International Development
• Previously the President & CEO of Shakey’s USA
• Leading the development and operations of the Shakey’s brands in Asia, Middle East, Australia and New Zealand
• Over 25 years of experience leading operations and franchising in top chained restaurants
3 Experienced Management Team4
VISION: to be the LEADING and PREFERRED full service pizza chain restaurant
1111
Q1 2017 Financial Results
13
11.6%Same Store
Sales Growth
22%Systemwide Sales
Growth
530bpsExpansion in
Gross Profit Margin
170bpsExpansion in
EBITDA Margin
26%Net Income After
Tax Growth
₱1.7Billion in
Net Revenues
For Q1 2017
Margin expansion from:
- Purchasing synergies
with Century Pacific
Group
- Favorable raw
materials costs due to
Company’s hedging
strategies
- Topline growth
attributed to successful
2017 promotional deal
and new stores
- Increased in-store
head count as well as
average checks
Q1 2017 Financial Performance
14
In Php MillQ1 2016
Unaudited
Q1 2017
Unaudited
Change
YoY
Total Revenue 1,330 1,667 25%
Cost of Sales (1,003) (1,169) 17%
Gross Profit 327 498 52%
Operating Income 163 287 76%
EBITDA 238 327 37%
Net Income Before Tax 178 240 34%
Income Tax (41) (67) 63%
Net Income 138 173 26%
Margins
Gross profit 24.6% 29.9% 530 bps
Operating income 12.3% 17.2% 490 bps
EBITDA 17.9% 19.6% 170 bps
Net income before tax 13.4% 14.4% 100 bps
Effective tax rate 23.0% 27.9% 490 bps
Net income 10.4% 10.4% -
YoY increase in
effective tax rate
primarily due to
skew/timing
61% 61%
26% 24%
13% 15%
Q1 2016 Q1 2017
Q1 2017 Sales and Revenue Breakdown
15
• Consolidated revenues
grew by 25% for Q1
2017.
• 5 new store openings
in Q1 2017
• Promotional meal
deals increased
restaurant activities96% 95%
4% 4%
1%
Q1 2016 Q1 2017
Revenue Breakdown (as a % of consolidated revenues)
24%
Dine-in
Delivery
Others (a)
22%
Net restaurant
sales
Royalty and
franchise fees
Third-party
commissary sales
23%
11%
43%
Segment Breakdown (as a % of systemwide sales)
• B1T1 pizza for carry-
out transactions
• “2017 meal deal” which
encouraged dining in
groups at an affordable
price
(a) sales generated from carry-out, functions, catering events, etc.
Q1 2017 Profitability
16
327
498
25%
30%
0%
10%
20%
30%
40%
50%
60%
70%
0
200
400
600
800
1000
1200
1400
1600
Q1 2016 Q1 2017
163287
12%
17%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
200
400
600
800
1000
1200
1400
1600
Q1 2016 Q1 2017
52%
Improved profitability due to:
• Purchasing synergies and operating efficiencies with the Century Pacific Group
• Change in depreciation policy to align with industry standards
• Favorable raw material costs due to hedging strategies by the Company
• Price increase to offset increase in commodity prices in latter half of 2017
76%
138 173
10% 10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
200
400
600
800
1000
1200
1400
1600
Q1 2016 Q1 2017
26%
Operating Income
(in Php Mill)
+530
bps
+490
bps
Gross Profit
(in Php Mill)
Net Income
(in Php Mill)
Balance Sheet Highlights
• Cash and Cash Equivalents used for
raw material importations and payment of
business tax
• AFS Investments of P1.0 billion were
redeemed last January 2017 and used as
payment of current portion of loan
payable
• Capital expenditures for construction of
new stores, a new corporate office and
an expanded commissary
• Reduction in trade payables due to
settling of 2016 payables to suppliers
• P1.0 billion loan payment in
January 2017
• P3.9 billion long-term loan balance, and a
net gearing ratio of 1.1x.
17
In PHP Mill YE 2016 Q1 2017
Cash 329 231
AFS investments 1,125 155
Total current assets 2,144 1,059
Property, plant, equipment 999 1,161
Goodwill 1,079 1,079
Trademarks 4,987 4,987
Other long-term assets 175 194
TOTAL ASSETS 9,384 8,480
YE 2016 Q1 2017
Trade and other payables 864 734
Current portion of loan
payable 1,048 49
Total current liabilities 1,977 897
Loan payable (net) 3,933 3,933
Total long-term liabilities 4,048 4,051
TOTAL LIABILITIES 6,025 4,948
TOTAL EQUITY 3,359 3,532
Capital expenditures for
construction of new
stores, a new
corporate office and
an expanded
commissary
Cash Flow Highlights
18
Change in depreciation
policy to align with
industry standards
IPO proceeds
temporarily invested in
money market funds
were used to prepay a
portion of the
outstanding loan
In PHP Mill Q1 2016 Q1 2017
Income before income tax 178 240
Depreciation and amortization 61 45
Interest expense - 43
Changes in working capital (6) (163)
Others (8) (17)
Net operating cash flow 225 148
CAPEX additions (72) (207)
Redemption of AFS investments 683 1,101
Acquisition of AFS investments - (130)
Others 81 (8)
Net investing cash flow 692 756
Payment of loan - (1,000)
Payment of interest - (2)
Payment of dividends (987) -
Net financing cash flow (987) (1,002)
Beginning Cash 389 329
Change in Cash (70) (98)
Ending Cash 319 231
Free Cash Flow 153 (59)
Born from P3.9 billion
acquisition loan
balance
• Maintained above
industry ROE for Q1 2017
despite increase in equity
base due to corporate
restructuring and initial
public offering in Q4 2016
• Decrease in Current
Liabilities due to payment
of ₱ 1.0 billion of
acquisition loan
• Company’s only interest
bearing debt is acquisition
leverage used in the
change of majority
shareholders last year
• Net gearing ratio down to
1.1x in Q1 2017 due to
payment of ₱ 1.0 billion of
acquisition loan.
Key Balance Sheet Metrics
19*uses an annualized equity figure to compute for Q1 2017 ROE
**Net debt to equity ratio = (total liabilities – cash) / total equity
***Net gearing ratio = (interest-bearing liabilities – cash) / total equity
Return on Equity
Current Ratio (x)
Net Debt to Equity (x)**
Net Gearing (x)***
1.70
1.34
2016 Q1 2017
1.381.06
2016 Q1 2017
using average equity
1.08 1.18
2016 Q1 2017
26% 20%
2016 Q1 2017*
Working Capital
Payables*Inventory*Accounts Receivables*
20
₱482 ₱385
30
21
-
30
60
90
-
200
400
600
800
1,000
1,200
1,400
2016 Q1 2017
days₱ Mns
Cash conversion cycle for the first quarter was
negative 20 days, a decrease of 6 days compared
to 2016
Decrease in payables and
receivable days primarily due to
streamlining of payment and
collection processes
₱248 ₱270
22 21
-
30
60
90
-
200
400
600
800
1,000
1,200
1,400
2016 Q1 2017
*average figures were used to compute for the working capital components
days₱ Mns
₱886₱799
78
62
-
30
60
90
-
200
400
600
800
1,000
1,200
1,400
2016 Q1 2017
days₱ Mns
Our Store Network
5New Stores in
Q1 2017
184Store Network
as of end 2016
20Target # of New
Stores in 2017
204Target Store
Count end 2017
22
11%FY 2017 target
growth from FY 2016
1International Store
by Q3 2017
81 80 89 97 111 114
55 6064
7073 75136 140
153167
184 189
2012 2013 2014 2015 2016 Q1 2017
Company-owned Franchise
Historical Growth in Store Network
23
• 5 new stores opened in Q1 of 2017
• Maintain a good mix between company-owned
and franchise stores
• Target of 20 new stores in 2017 will increase
network by another 11%
Franchised40%Company-
owned60%
+2
+3
new stores
opened in
Q1 2017
Geographic Breakdown as of Q1 2017
National Capital
Region (NCR)
46%
Luzon, ex-NCR
41%
Visayas
9%
Mindanao
4%
24
Concentration of stores
still in Metro Manila,
where per capita incomes
are higher
Opportunity to grow
outside the usual urban
centres benefitting from
key consumer trends –
affordable premiumization,
eating out more often,
upgrading from fast food to
fast casual
No international
presence yet despite
ownership of the trademark
for the rest of Asia (ex
Japan, Malaysia), Middle
East, Australia, & OceaniaInternational
0%
Flexibility in Formats
25
Multiple store formats allow for flexibility in
expanding and targeting different markets
• Standalone stores are
larger and also serve as
‘billboards’ for the brand
• Other formats include
small size outlets for
newer markets and
delco’s for added delivery
capacity
6%
40%
54% Mall
Standalone
Others
Store Breakdown by Format
As of Q1 2017
26
Q1 2017 New Stores
Magsaysay
January 2017
UPS
March 2017
Palo, Leyte
March 2017
Caltex SLEX
March 2017
C-3 A. Bonifacio
March 2017
Stock Price Performance
27
Stock Price Performance (Bloomberg Ticker: PIZZA PM)
Source:
Deutsche Bank
2017 Estimates
PIZZA
Phil.
Consumer
Average
PER (x) 28.0 22.9
EV/EBITDA (x) 17.7 13.0
ROE (%) 20.6 15.9
MARKET CAPITALIZATION
$345MnDecember 2016
$424MnMay 2017
PERFORMANCE SINCE IPO
₱11.26IPO Price
+23%Return since IPO
Stock Price Performance
28
As of 05/11/2017
Current Price PHP 13.80
Initial Listing Price PHP 11.26
Range since listing date
(12/15/16 – 05/11/17)PHP 10.90 – 14.80
No. of outstanding shares 1,531,321,053
Shareholding structure
CPGI: 52.0%
Arran (GIC): 18.5%
Prieto Family: 6.5%
Free Float (%) 23.0%
3-month Average TurnoverPHP 41.04 Million
USD .8221 Million
Market CapitalizationPHP 21.13 Billion
USD 423.3 Million
Sell-side Coverage:
As of 05/11/2017
Performance since listing
date
(12/15/16 – 05/11/17)
+23%
Relative to Index
(12/15/16 – 05/11/17)+10%
Annex: Financial Statements
SPAVI and Subsidiaries Financial Statements
Consolidated Unaudited Statements of Comprehensive Income
in PHP Mill Q1 2016 Q1 2017
Net sales 1,281 1,607
Royalty and franchise fees 49 59
Total revenues 1,330 1,667
Cost of sales (1,003) (1,169)
Gross profit 327 498
Operating expenses (164) (211)
Operating income 163 287
EBITDA 238 327
Interest expense - (43)
Other income (expense) - net 15 (4)
Net income before tax 178 240
Provision for income tax (41) (67)
Net income after tax 138 173
Margins
Gross profit 24.6% 29.9%
Operating income 12.3% 17.2%
EBITDA 17.9% 19.6%
Net income 10.4% 10.4%
Effective tax rate 23.0% 27.9%
30
SPAVI and Subsidiaries Financial Statements
Consolidated Unaudited Statements of Financial Position
in PHP Mill YE 2016 Q1 2017
Cash and cash equivalents 329 231
AFS investments 1,125 155
Trade and other receivables 421 349
Inventories 256 283
Prepaid expenses and other current assets 13 41
Total current assets 2,144 1,059
Property and equipment 999 1,161
Goodwill 1,079 1,079
Trademarks 4,987 4,987
Rental and other deposits 105 124
Deferred input value-added tax 40 41
Deferred tax assets - net 30 29
Total non-current assets 7,240 7,421
TOTAL ASSETS 9,384 8,480
in PHP Mill YE 2016 Q1 2017
Accounts payable and other current liabilities 864 734
Loan payable - current portion 1,048 49
Income tax payable 64 115
Total current liabilities 1,977 897
Loans payable (net of current) 3,933 3,933
Accrued pension costs 34 34
Accrued rent 64 65
Dealers' deposits and other noncurrent liabilities 17 19
Total non-current liabilities 4,048 4,051
TOTAL LIABILITIES 6,025 4,948
Capital stock 1,531 1,531
Additional paid in capital 1,354 1,354
Other components of equity (12) (12)
Retained earnings 487 659
Total equity 3,359 3,532
TOTAL LIABILITIES and EQUITY 9,384 8,480
31
SPAVI and Subsidiaries Financial Statements
Consolidated Unaudited Statements of Cash Flows
32
In PHP Mill Q1 2016 Q1 2017
Income before income tax 178 240
Adjustments for:
Depreciation and amortization 61 45
Interest expense - 43
Others 1 (1)
Working capital changes (6) (163)
Income taxes paid (10) (16)
Interest received 1 -
CASH FLOWS FROM OPERATING ACTIVITIES 225 148
Redemption of AFS investments 683 1,101
Acquisition of property and equipment (72) (207)
Acquisition of AFS investments - (130)
Decrease (increase) in rental and other deposits 7 (10)
Increase in dealer's deposits and other noncurrent liabilities - 3
Proceeds from disposals of PPE 6 -
Sale of financial assets at FVPL 36 -
Collection of intercompany loans 32 -
CASH FLOWS FROM INVESTING ACTIVITIES 692 756
Payment of:
Loan - (1,000)
Interest - (2)
Dividend (987) -
CASH FLOWS FROM FINANCING ACTIVITIES (987) (1,002)
NET INCREASE (DECREASE) IN CASH (70) (98)
Cash and cash equivalents, BEGINNING 389 329
Cash and cash equivalents, ENDING 319 231
This document is highly confidential and being given solely for your information and for your use and may not be, or any portion thereof, shared, copied,
reproduced or redistributed to any other person in any manner.
The statements contained in this document speak only as of the date which they are made, and the Company expressly disclaims any obligation or
undertaking to supplement, amend or disseminate any updates or revisions to any statements contained herein to reflect any change in events, conditions
or circumstances on which any such statements are based. By preparing this presentation, none of the Company, its management, and their respective
advisers undertakes any obligation to provide the recipient with access to any additional information or to update this presentation or any additional
information or to correct any inaccuracies in any such information which may become apparent.
This presentation contains statements, including forward-looking statements, based on the currently held beliefs and assumptions of the management of
the Company, which are expressed in good faith and, in their opinion, reasonable. Forward-looking statements in particular involve known and unknown
risks, uncertainties and other factors, which may cause the actual results, financial condition, performance, or achievements of the Company or industry
results, to differ materially from the results, financial condition, performance or achievements expressed or implied by such forward-looking statements.
Given these risks, uncertainties and other factors, recipients of this document are cautioned not to place undue reliance on these forward-looking
statements.
Any reference herein to "the Company" shall mean, collectively, Shakey’s Pizza Asia Ventures Inc. and its subsidiaries.
SHAKEY’S PIZZA ASIA VENTURES INC.
investorrelations@shakeys.biz
www.shakeyspizza.ph
http://edge.pse.com.ph/companyInformation/form.do?cmpy_id=664
+632-839-0156
Taguig City, Philippines
33
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