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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling
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To: Michail Shadkin who wrote (1510)6/4/2001 5:30:38 PM
From: docwild  Read Replies (1) of 6873
 
KKD Growth rate..

Have been watching your thread with interest since we talked, looking good!
But don't agree with your analysis of KKD growth. Consider:
..it took 60 years for KK to grow to 170 stores (60 company stores)
..Management appears to be mostly friends and family, kids of the founding group, half of whom were educated as bean counters (CPAs or Banker). Nothing wrong with that except that particular genre of management is not known for it's aggressive growth characteristic (no offense to you Michail).
..35% of recent EPS growth was directly a result of using IPO proceeds to pay off debt ..makes CPAs warm and comfortable.
..The rest of the appearance of growth came from pre IPO restructuring and a massive store upgrade program that produced the 99 loss but was needed because the old stores were operating at max capacity.
..Virtually all of the real growth came from franchise ops and that wasn't red hot and doesn't put any monster numbers on bottom line.
Basically, we are looking at solid, conservative, business ops that we should expect from an old family business run by accountants. I'm guessing 90% of the recently reported growth is a one time deal. For more of same, you would expect another major capital expense and nothing indicates that is brewing (to the contrary, the 10K states they will be relying almost exclusively on franchise expansion). If you assign a relatively hot PE of 30, we should expect stock px of $18 ..when the doughnut bubble collapses. I have read that there is a lot of insider selling, which makes perfect sense to me, they know what the company is worth and $80/sh is too good to pass up.
Regards,
Doc
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