# MTY Food Group (MTY.TO)



## riseofamillionaire (Feb 23, 2012)

One of my faves for the long term. 

MTY operates quick service restaurants in shopping center food courts. They have over 2200 restaurant kiosks operating under 27 brands within Canada and internationally. The balance sheet is as solid as can be, long term debt/ equity .08, good cash cusion although cash was reduced to only 10 million in Q4 2011. Because of their strong financial position, they can grow steadily through acquisition as well as benefit from any pickup in consumer spending. As mall traffic increases, MTY’s business will benefit. Management is particularly keen on international expansion which makes me believe that there is still a lot of the story to unfold over the long term. They consistently raise the dividend and have very shareholder friendly policies.

A recent article: http://business.financialpost.com/2012/02/21/quebec-food-king-sees-more-acquisitions-in-2012/


----------



## PMREdmonton (Apr 6, 2009)

There are a few things that stand out when I look at their financials:

They have been increasing revenue about 30% per year.
They have been increase net income about 15% per year.
They have increased BV per share about 20% per year.

They have grown their business a lot without diluting shareholders and without taking on excess debt. They have a very good ROE and ROIC so that all points to good management.

The one thing that gives me pause is how much their margins have been falling. Have they lost out a bit on execution of their cost control while pursuing growth?

On a P/E basis and P/FCF basis they aren't exactly cheap given the business they are in and their dividend is pretty pathetic compared to some of the other players in the food services business in Canada but their growth has been fairly impressive. With all the brands they have they should probably pause a bit to see what synergies and cost savings they can come up with and decide if it makes sense to keep all these diverse food service companies.

Overall I'm reluctant to enter here because the whole industry is lacking in growth, facing increasing costs and increasing competition.

If they control costs better and up the dividend to around 5% I might re-consider. I don't want management to be too flush with cash and pursue growth when it doesn't make sense in an industry like this. It is better just to more efficiently run the brands he has to maximize income and put a pause on the expansion.

I'd consider this one on a dip to 11.50 if they doubled the dividend.


----------



## sam (Mar 16, 2012)

This stock has a very low volume


----------



## PMREdmonton (Apr 6, 2009)

I've mentioned this in other threads but this is good for a patient investor. There is data going back many years showing illiquid stocks get better returns. I don't necessarily view this as a major negative if you are a long-term buy and hold investor.


----------



## doctrine (Sep 30, 2011)

It's illiquid but a small investor can still get in here. 

I like everything about this except the dividend. It would really have to be about 4% or a 40% payout instead of a 15


----------



## riseofamillionaire (Feb 23, 2012)

PMREdmonton said:


> There are a few things that stand out when I look at their financials:
> 
> They have been increasing revenue about 30% per year.
> They have been increase net income about 15% per year.
> ...


great, thanks for that


----------



## Mall Guy (Sep 14, 2011)

For the record, love what Stanley Ma has done! However, until he proves he can make Mr Sub and Country Style viable (or re-purpose their real estate) , and they are a departure from the food court, juries out. Too many brands at the end of their life cycle . . . Yogen Fruz, TCBY. . . when was the last time you had a frozen yogurt ?


----------



## Spudd (Oct 11, 2011)

I used to work for both Mr Sub and TCBY in high school/university. LOL. The TCBY I worked for went out of business shortly after I quit. We never had any customers.


----------



## riseofamillionaire (Feb 23, 2012)

Mall Guy said:


> For the record, love what Stanley Ma has done! However, until he proves he can make Mr Sub and Country Style viable (or re-purpose their real estate) , and they are a departure from the food court, juries out. Too many brands at the end of their life cycle . . . Yogen Fruz, TCBY. . . when was the last time you had a frozen yogurt ?


I have doubts about Country Style as well. MTY is in danger of having too many unfocused brands, but the core brands and their locations (in prime shopping centers) cancels out the negatives for me.


----------



## riseofamillionaire (Feb 23, 2012)

Stock has accelerated nicely off of earnings yesterday http://stockcharts.com/h-sc/ui?s=mty.to - net income up 26%

Here's the press release: http://www.theglobeandmail.com/globe-investor/news-sources/?date=+20120426&archive=cnw&slug=C9435


----------



## PMREdmonton (Apr 6, 2009)

Yes, but same store sales were only up 3.5%.

They are going to run out of growth by acquisition at a reasonable cost soon and be left with too many unfocused brands with little cost saving synergies.

I'll pay more interest to them if and when they pay a 6% dividend like some of the other players in this field.


----------



## riseofamillionaire (Feb 23, 2012)

PMREdmonton said:


> Yes, but same store sales were only up 3.5%.
> 
> They are going to run out of growth by acquisition at a reasonable cost soon and be left with too many unfocused brands with little cost saving synergies.
> 
> I'll pay more interest to them if and when they pay a 6% dividend like some of the other players in this field.


I wouldn't pay much attention to 1 quarter same store sales numbers. Their business tends to move in irregular trends to more conventional restaurants, I think because of their location in shopping centers. I hope they do not get into too much big box, standalone style restaurants. I believe in Stanely Ma as a charasmatic leader that wants to personally seek international expansion and build a worldwide business. IMO still plenty more of the story to unfold, but your concerns will show up at some point probably.

I agree with you on the dividend names in this space. They are fantastic names to own in this environment too. I like keg.un bpf.un srv.un


----------



## PMREdmonton (Apr 6, 2009)

riseofamillionaire said:


> I wouldn't pay much attention to 1 quarter same store sales numbers. Their business tends to move in irregular trends to more conventional restaurants, I think because of their location in shopping centers. I hope they do not get into too much big box, standalone style restaurants. I believe in Stanely Ma as a charasmatic leader that wants to personally seek international expansion and build a worldwide business. IMO still plenty more of the story to unfold, but your concerns will show up at some point probably.
> 
> I agree with you on the dividend names in this space. They are fantastic names to own in this environment too. I like keg.un bpf.un srv.un


Yes, all of those names pay a nice, steady dividend and are fairly good defensive names, especially bpf.un.

This group of franchises he runs is still fairly small-cap but it is a rag-tag bunch without much brand awareness or brand cohesiveness. I'm not sure how much synergies there are to be had in such disparate businesses outside of the management side of things and the business still isn't of the scale to get major concessions out of suppliers like MCD could.

I think he should focus more on cost-savings and return dividends to share-holders as room for growth dries up in this space. Those who grow by acquisition alone tend to eventually fall apart at some point and there doesn't seem to be much organic growth to this story.


----------



## riseofamillionaire (Feb 23, 2012)

PMREdmonton said:


> Yes, all of those names pay a nice, steady dividend and are fairly good defensive names, especially bpf.un.
> 
> This group of franchises he runs is still fairly small-cap but it is a rag-tag bunch without much brand awareness or brand cohesiveness. I'm not sure how much synergies there are to be had in such disparate businesses outside of the management side of things and the business still isn't of the scale to get major concessions out of suppliers like MCD could.
> 
> I think he should focus more on cost-savings and return dividends to share-holders as room for growth dries up in this space. Those who grow by acquisition alone tend to eventually fall apart at some point and there doesn't seem to be much organic growth to this story.


I could see the company slowly going the way of a higher dividend, less aquisition growth overtime.


----------



## riseofamillionaire (Feb 23, 2012)

Sexy breakout on this stock with volume confirmation http://stockcharts.com/h-sc/ui?s=MTY.TO


----------



## riseofamillionaire (Feb 23, 2012)

Liking the volume activity after the recent run. Volume spikes on these small pullbacks. Still screening cheap for a high growth name - net income up 30+%, forward p/e of 15. When compared to more well known growth names like Lululemon, net income up 30%, yet forward p/e of 33.


----------



## Dibs (May 26, 2011)

Every day on my way to work I pass some banners on the metro platform. The last few weeks there have been three banners side by side advertising fast food restaurants: Thai Express, Tiki-Ming, and some greek one. It took me a few days to notice that they were all owned by MTY food group, and their logo was indeed listed in the corner. 

Thai express was popular among my friends when we were in college, but I found that a local noodle shop did a better pad thai. This noodle shop also does sushi. In the last few years both a Thai Express and a Sushi Shop opened within a block of this restaurant (located on a commercial street surrounded by residential housing). The noodle shop is still busy as ever - they even raised their prices. 

Despite their lack of success in pushing my favourite little noodle shop out of business, I think that the restaurants they own do fairly well downtown in the food courts. So I decided to see what kind of company MTY is. I wasn't surprised to find a thread here on CMF.

Here is a report on MTY from Validea dating April 2013.

MTY recently released their 3rd quarter results, same-store sales declined 1.7%. 

For those of you who read French, here is an article on the latest results, and here is a discussion thread dating back to 2011.

I've added MTY to my watchlist. I like companies with consistent revenue growth and good return on equity. However as PREdmonton mentioned future growth prospects are not assured.


----------



## Dibs (May 26, 2011)

Q1 2014 same store sales growth still negative at 1.7%. Here is a graph that I put together from their reports:


----------



## Dibs (May 26, 2011)

Saw this in La Presse today. 

Insider Trading: between June 18 and 23 2014, one of the directors made a series of public market buys for 22000 shares (~$600,000) to increase his total holdings to 142,000 shares.


----------



## Dibs (May 26, 2011)

Q3 2014 Same store sales growth still negative at -1.6%. The stock is down 4.5% this morning on the news.

http://www.mtygroup.com/media/268409/20141007 mty announces q3 results.pdf


----------



## CPA Candidate (Dec 15, 2013)

It's down about 9% today now.

I always felt the valuation on this stock was rather high.


----------



## james4beach (Nov 15, 2012)

Congrats to to those who've been holding MTY for a while; you've had great returns. It was recently added to the TSX Composite Index in September, so the stock is probably going to start attracting more attention.

I hold some in my Lowdiv portfolio. I also noticed that it's the largest holding in the Mawer New Canada fund, a whopping 5% of their $1.1 billion portfolio.


----------



## james4beach (Nov 15, 2012)

Ouch, disappointing earnings and MTY is down sharply. I'm not sure this position is going to work out for me, but still holding it for now. Small caps are more volatile than large caps, so I'm not that surprised at its wild swings.

Definitely a high risk holding for me. MTY is currently 1% of my Canadian stock holdings so it has a limited effect in any case. My Canadian equities break down as 88% large and mega caps, 12% small and mid caps (high risk).


----------



## kelaa (Apr 5, 2016)

I noticed that two of the food court brands (Cultures and Thai Express) we recently ate at in our local mall were both MTY brands. The food is actually quite decent. I think it is interesting. I recall from the recession consumer fast food spending was more durable than the restaurant spending. Not liking how much they are paying for the new pizza chain, though.


----------



## Butter (Nov 26, 2017)

kelaa said:


> I noticed that two of the food court brands (Cultures and Thai Express) we recently ate at in our local mall were both MTY brands. The food is actually quite decent. I think it is interesting. I recall from the recession consumer fast food spending was more durable than the restaurant spending. Not liking how much they are paying for the new pizza chain, though.


Definitely dropped after their acquisition of Papa's

But maybe a little too much? This is trading near 52 week lows. 

F P/E of 15 when it historically sits at 19


----------

