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Gold/Mining/Energy : Yogen Fruz IT'S ALIVE, IT'S ALIVE -- Ignore unavailable to you. Want to Upgrade?

To: telecomguy who wrote (1106)	2/2/1999 6:29:00 PM
From: Stocker	Read Replies (2) \| Respond to of 2453

Re I wonder why the Market Makers and the institutions are so fixated on YF's Bottom Line? I can't believe that sophisticated investors bought YF for short-term earnings or dividend yield! .......YF has to aggressively develop new markets and grow their revenues through acquisition & co-marketing deals and as long as they are doing that, it is ridiculous to value them at 11 times earnings just because the old incumbent food giants are valued at that mulitple. I disagree with you on this one. First, market makers don't really care about the long-term prospects of the company. They just want volume so they can make their spread on each trade. As for institutional investors, I don't think they're reading YF entirely wrong. You're right that the important things to look at long-term are market share growth, revenue growth, new channels etc., but those are exactly the kinds of things institutional players are concerned about right now. Here's what I think the big players would be concerned about: YF is shifting away from it's proven area of growth, franchising, to a market they have yet to prove themselves in, volume grocery. There are also concerns they'll be able to successfully pull off another merger or two "longer-term" (any word on EPIE???). In fact, the market is not even convinced that the Integrated merger is going as well as was hoped (not that it's not working, but the market I think had higher expectations). Now, if YF has to pay up for EPIE, say $14.50/share, there's more risk that they've overpaid and they'll have to execute perfectly to make it work. And, they don't have their stock to use as a currency anymore. Also, strictly looking at YF's growth, it has slowed appreciably. Looking at revenue growth, the main thing to look at for most small, growing companies, there's concern that it's slowing too, relative to what was expected when YF was just a franchiser. Further, the media does still love to look at earnings and on that front there's concern higher tax rates, as a result of the decline in offshore franchise fees, will start to erode them. Yes, having domestic revenues play a larger role is a plus, but there's something to be said for the tax breaks large foreign revenues produce. Look at it this way, the market thinks foreign revenues will decline/taxes rise (that's a negative), but the market is also unsure of how domestic earnings (as a result of Integrated) are going to shape up (now you've got a double whammy). The market is valuing YF at a lower multiple, not because that's where similar companies trade, but because of risk they may have problems with revenues, acquisitions, etc. All in all, expectations 6 months to 1 year ago where for much faster growth - they've been dramatically reduced. Then, there's also the question of management credibility. I think at least some large investors are concerned with management's summer reporting slip up. Several months passed before management was even aware that they where having problems overseas. Management argued that they where focused/distracted by the merger and that they now have systems in place to ensure more timely reporting. Some I'm sure would be willing to forgive that of course, but not all institutions can or would reasonably accept that justification. The question of bad accounting (which I personally never thought was true) must have rattled a few more institutions. Even if you thought the story was just a ploy by the shorts in YF, you still had to expect it would undermine some people's expectations, true or untrue. Add in the fact that a few people are now talking about management infighting, again true or untrue, and you have a lot of unknowns starting to build up. All of this does tie into the market's expectations of how YF will do longer-term. Long-term expectations for YF have fundamentally changed because they are now pursuing a different business angle and that has brought a lot of uncertainty. You have to admit that given where the stock price is today, expectations of the majority of YF investors are shaken, not just in the short-term either. To me, it's those expectations, not as much the facts that matter most. In time YF may actually prove the majority wrong, but they will have a tougher time repairing the psychological damage than a lot of people here think. It will take hard results to win back long-term investors.