# Sir Royalty Income Fund - SRV.UN



## gibor365 (Apr 1, 2011)

Anyone heard today news about SRV.UN? I couldn't find anything why it's dropped 4% at 2.30pm :upset:


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## liquidfinance (Jan 28, 2011)

I'm wondering if it has something to do with the proposed secondary offering of units. 

I had a read through the preliminary prospectus and I'm wondering if we are going to find out that $12.25? may be the offer price of these new units.


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## gibor365 (Apr 1, 2011)

liquidfinance said:


> I'm wondering if it has something to do with the proposed secondary offering of units.
> 
> I had a read through the preliminary prospectus and I'm wondering if we are going to find out that $12.25? may be the offer price of these new units.


Yeah, but it was couple of weeks ago.... today price dropped exactly 2.30pm


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## doctrine (Sep 30, 2011)

It could be anything, including reaction to someone else selling. SIR is not quite equal to Boston Pizza; they have a 6% royalty as opposed to a 4% Royalty, and at last report the parent company had a small loss in 2012 (the royalties would be an expense). 8.6% yield is quite high now; I'd like to see this prospectus and what price the units are offered at.


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## gibor365 (Apr 1, 2011)

doctrine, considering fact that NHK is back and maybe even going to Play off should greatly benefit SIR earnings as they have a lot of restaurants downtown Toronto


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## Saniokca (Sep 5, 2009)

looks like someone unloaded a big chunk that's all... average volume is 5.5k, today's volume was 32k


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## liquidfinance (Jan 28, 2011)

doctrine said:


> It could be anything, including reaction to someone else selling. SIR is not quite equal to Boston Pizza; they have a 6% royalty as opposed to a 4% Royalty, and at last report the parent company had a small loss in 2012 (the royalties would be an expense). 8.6% yield is quite high now; I'd like to see this prospectus and what price the units are offered at.


You can read the prelim prospectus on SEDAR.

Of course the important information is missing. 

Number of units to be issued.
Price of units

Main part from the use of proceeds is the following 



> The net proceeds from the sale of the Offered Units to be received by SIR under this short form prospectus, after deducting the Underwriters’ Fee of $, are estimated to be $. The Fund and the Partnership will not receive any proceeds pursuant to this Offering. SIR will pay the expenses of the Offering estimated to be $0.5 million. SIR intends to use a portion of the net proceeds of the Offering to fund renovation activities of select existing restaurants within the Royalty Pooled Restaurants. SIR has five commitments to lease new properties, in which it plans to build seven new restaurants. SIR has begun the early stages of construction of six of these restaurants which it expects to open in calendar 2013. See “The Business – Recent Developments and New Restaurant Plans”. SIR intends to use the balance of the net proceeds of the Offering to fund a portion of the construction and development costs of these new restaurants.


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## doctrine (Sep 30, 2011)

Number of units and price are very important. The market will almost certainly drive the price to the offering level, and then either higher or lower depending on how it is perceived.


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## Saniokca (Sep 5, 2009)

_"Under the agreement, the syndicate has agreed to purchase 895,000 Units at a purchase price of $12.30 per Unit for gross proceeds of $11,008,500. The Units are being sold to the syndicate by SIR. The transaction is expected to close on or about March 14, 2013."_

I don't know but it looks fishy to me... unless this was public info yesterday when the shares dived.


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## gibor365 (Apr 1, 2011)

doctrine said:


> Number of units and price are very important. The market will almost certainly drive the price to the offering level, and then either higher or lower depending on how it is perceived.


Sure it's important! But interesting part that info about proposed secondary offering of units was published about 10 days ago and didn't affect stock, it happened just yesterday in half an hour time... looks like somebody got insider info about price ...


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## gibor365 (Apr 1, 2011)

Saniokca said:


> _"Under the agreement, the syndicate has agreed to purchase 895,000 Units at a purchase price of $12.30 per Unit for gross proceeds of $11,008,500. The Units are being sold to the syndicate by SIR. The transaction is expected to close on or about March 14, 2013."_
> 
> I don't know but it looks fishy to me... unless this was public info yesterday when the shares dived.


Yesterday after close. I was searching the web for half an hour in order to find some info (including SIR website) .....nothing !
It's very fishy... I will send angry email to SRV...


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## liquidfinance (Jan 28, 2011)

This was not public info yesterday. I checked SEDAR. Nothing! I trawled the web for a couple of hours hunting for news as well. 

Although it confirms my suspicion. In fairness though the preliminary prospectus was published and although figures not disclosed we knew that there would be an upcoming dilution of units and had the opportunity to act accordingly. 

The funds latest 1/4 results will be available soon so now to see that likely impact this will have on the pay out ratio.


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## liquidfinance (Jan 28, 2011)

liquidfinance said:


> This was not public info yesterday. I checked SEDAR. Nothing! I trawled the web for a couple of hours hunting for news as well.
> 
> Although it confirms my suspicion. In fairness though the preliminary prospectus was published and although figures not disclosed we knew that there would be an upcoming dilution of units and had the opportunity to act accordingly.
> 
> The funds latest 1/4 results will be available soon so now to see that likely impact this will have on the pay out ratio.



Just reading through this... Is there going to be an overall dilution of the stock?

Under the agreement, the syndicate has agreed to purchase 895,000 Units at a purchase price of $12.30 per Unit for gross proceeds of $11,008,500.
The Units are being sold to the syndicate by SIR.
SIR Corp. currently holds class A GP units ("Class A GP Units") of SIR Royalty Limited Partnership which are exchangeable for 3,082,951 Units of the Fund, representing an indirect 34.4% interest in the Fund.
SIR will exchange 895,000 Class A GP Units for 895,000 Units to be sold pursuant to the Offering.
SIR expects to beneficially own an aggregate of 2,187,951 Class A GP Units, representing an equivalent beneficial ownership of 2,187,951 Units, or approximately a 24.4% indirect interest in the Fund (on a fully-diluted basis).

So really in terms of this is there really going to be much of a net effect. 

SIR has reduced it's overall ownership of the fund.
So rather than doing what they did last Novembed. Converting and then selling on the public market they have agreed a price for the units with the syndicate. This seems much more beneficial to us unit holders than them trying to dump 895,000 units on the open market.


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## doctrine (Sep 30, 2011)

There will be a dilution of 895,000 units. Presumably, SIR parent corp will use the proceeds ($11M) to open a number of new restaurants that will not negatively impact earnings per share. The conversion of the class A units is already accounted for under dilution rules.

I definitely think SRV is a better buy at $12 than $13. It's undervalued compared to its peers (A&W, PZA-PZA, BPF) but I think that reflects the risks of the company. It was a $8-9 stock in 2011 although distributions are higher.


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## gibor365 (Apr 1, 2011)

doctrine said:


> There will be a dilution of 895,000 units. Presumably, SIR parent corp will use the proceeds ($11M) to open a number of new restaurants that will not negatively impact earnings per share. The conversion of the class A units is already accounted for under dilution rules.
> 
> I definitely think SRV is a better buy at $12 than $13. It's undervalued compared to its peers (A&W, PZA-PZA, BPF) but I think that reflects the risks of the company. It was a $8-9 stock in 2011 although distributions are higher.


 I bought 2 trenches of SRV. One at $13 and one at $12 (50/50) several f months ago.. as far as dividend is sustainable i'm ok with it


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## JosephK (Nov 7, 2012)

Anyone have any brilliant explanation as to why this thing is consistently valued less than the other restaurant royalty stocks? Is it just that it is a smaller more geographically concentrated organization? Or any skeletons lurking in the closet that one should beware of?


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