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Strategies & Market Trends : Value Investing

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To: Mark Marcellus who wrote (29253)	12/14/2007 12:35:32 AM
From: James Clarke	Read Replies (2) of 78825

Bingo! KONA looks very much like PF Changs when it had 20 restaurants. There was a five year huge growth curve after that where early investors made a lot of money. Thats why you don't want to wait until the concept is proven. The concept has been around since 1998. Management is not new to this - the COO is the founder of the concept in 1998 and the CEO was the financier of the concept in 1998. What is different about this and every other chain that says they are going to go from 20 to 100 restaurants is the unit economics. $5.5 million of revenues per unit at a 22% cash flow margin at the unit level. You won't find many restaurant chains with those unit economics. CAKE is one. PFCB is another. I also fully agree with your takeover insight. At this price for a proven concept with all the room in the world to grow it KONA just looks like a sitting duck for a takeover by PFCB or any one of the public restaurant chains which have saturated the growth of their brands but are kicking out a ton of cash they don't know what to do with.

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