Good news, stock buy back:
It looks like they purchased another 600,000 shares since the end of the second quarter according to the press release. (They finished off the old program). Star announces a buyback of up to 3.5 million more shares. Back up the truck, anything under $9.00 is a steal! This represents a true VALUE play. SSS (from a sequential quarter basis)has stabalized. Earnings should be at least 80 cents per share if they just maintain what they have. Tack on another 80 cents per share of depreciation and amortization and you have $1.60 in cash flow.
Book Value at $15.00 per share, $1.75 of this is cash, 2/3 of the real estate they have is owned, buildings are depreciated over 20 years (5% depreciation per year)and Equipment over 7 years. To me this gives me some comfort that book value can be recovered as the numbers of store opened have been 36, 48, 45, 45, 60 and 2 in 1993, 1994, 1995, 1996, 1997, and 1998 respectively. The equipment in the restaurants opened in 1993 are virtually written off. All the buildings purchased in 93,94,95,96,97 and 98 are 30%,25%,20%,15%, and 10% written off. Every share they purchase for $9 or under adds $6.00 more to book value. The current cash flow will more than cover the stock re-purchase program since they suspended development (except for what is in the pipeline).
The cash flow numbers referenced above already include healthy investment in recruitment, training, and new system (Point of Sale) implementaion.
BOTTOM LINE - If this company had to be liquidated, I think $10 per share is safe. If they can effect a turnaround from here, $1.20 to $1.50 per share would be easy. I see this stock in the $18 to $25 range in six to twelve months if the cards play out. I see $10 per share bare minimum if it had to be liquidated. This is why I say VALUE. No one wants it right now, people gravitate toward the high flying 10% per week stocks ( I would hate to be the person that bought AMZN at $222). Value takes patience, sometimes 12, 18, 24 months.
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