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Non-Tech : RAINFOREST CAFE -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Vail who wrote (4606)	5/17/1999 4:55:00 AM
From: ShugNite	Read Replies (2) \| Respond to of 4704

GOOD INFOR FOR RAIN HOLDERS AND FOR INTERESTED FUTURE RAIN HOLDERS BOOK VALUE IS OVER $3.00 MORE THAN CURRENT STOCK PRICE OF $5.25, someone said to me that book value doesn't matter, this is not the case for RAIN. Valuation--Book value & other thoughts THE book value really doesn't matter when we're talking about property, plant and equipment. What does matter is that fixed assets produce cash flow. However, you can't ignore the fact that RAIN has working capital of $60 million ($43 million cash) compared to a market cap. of only $125 million. Cash is a hard asset that can't be discounted. Thus RAIN is trading for a cash adjusted $3.50 per share, which is less than 50% of stated book value. Enterprise value is thus $80 million, or $60 million if you choose to count current assets outside of cash. The company has no debt and should generate EBITDA of over $40 million in 1999, and over $50 million in 2000. Thus at today's stock, RAIN is being valued for about 2X cash flow. That provides for a pre-tax cash-on-cash return of 50% to all new investors in the stock. At book value, that return would be 25-30%, implying that book value is still too low of a measure of this company's value. Remember that book value includes the cost of constructing 5 very successful units that are worth at least the cost of constructions, but realistically 1.5-2X more than that. I am talking about 2 Disney units (which, combined, generate sales of $55-60 million and cash flow of $12-15 million), which together cost $25-27 million to build and are easily worth $45-60 million. Las Vegas generates $17-20 million in sales and cash flow of over $5 million annually. This unit is worth way more than the $12 million it cost to build it. Chicago and Mall of America are similarly worth way more than what it cost to build them. Overall, RAIN is worth way more than book value based on it's ability to generate cash flow, which is greatly enhanced by its icon properties, such as the ones listed above. These are truly trophy properties with high, sustainable cash flows. NOT TO MENTION THE NEWEST RAIN CAFE IN PARISDISNEY.