# Second Cup Ltd (SCU.TO)



## jamesbe (May 8, 2010)

Any thoughts? Looks fairly stable and pays a good dividend. I don't own THI, so was looking at them and noticed the huge dividend from second cup....


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## Andrej (Feb 25, 2010)

Franchisees pay a 9% royalty and 3% advertising/ marketing fee. As long as they don't start closing a bunch of stores it should be safe.


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## AnimeEd (Jul 22, 2012)

Don't see much problem with the other numbers but the total asset is misleading.

End of Q1
Total Asset: 101.78mil
87.92mil of that asset is in Intangibles

In the year end 2011 report, it states that 86.9mil of Intangibles assets are in Trademarks.
They also have this note:
"Management concluded the estimated recoverable amount of its intangible assets exceeded their carrying value as at the
Transition date and December 31, 2011 and 2010 and that the intangible assets were not impaired."

They actually admits that the intangibles are not worth what they are stating. Not saying it is not a good investment but don't be fooled by the 1.03 Price to Book ratio!

edit: Ethan help corrected that my interpretation is reversed. Management thinks that the intangible is more worth than they are currently estimated.


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## doctrine (Sep 30, 2011)

The good news here is that they are covering their dividend payout over the last year.

The bad news is they had a bad Q1, and only earned $0.10 but paid their $0.15 dividend. They are opening new stores, but same store sales are stagnant. It was probably a less risky buy at $5 than $7. Probably safe dividend though.


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## riseofamillionaire (Feb 23, 2012)

Good balance sheet, growth not exciting - at this level it seems fairly valued, 11 times cash flow, below average ROE. I'd rather own Tims. I do not own either. As a yield play it works.


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## Ethan (Aug 8, 2010)

AnimeEd said:


> Don't see much problem with the other numbers but the total asset is misleading.
> 
> End of Q1
> Total Asset: 101.78mil
> ...


The carrying value is the amount recorded on the balance sheet, the estimated recoverable amount is the fair value, or market value. Management is indicating their intangibles have a greater value than what they are recorded at. If the intangibles were estimated to be worth less than their recorded or carrying value, they would have to take an impairment.


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## AnimeEd (Jul 22, 2012)

Ethan said:


> The carrying value is the amount recorded on the balance sheet, the estimated recoverable amount is the fair value, or market value. Management is indicating their intangibles have a greater value than what they are recorded at. If the intangibles were estimated to be worth less than their recorded or carrying value, they would have to take an impairment.


I read that one too quickly


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## liquidfinance (Jan 28, 2011)

doctrine said:


> The good news here is that they are covering their dividend payout over the last year.
> 
> The bad news is they had a bad Q1, and only earned $0.10 but paid their $0.15 dividend. They are opening new stores, but same store sales are stagnant. It was probably a less risky buy at $5 than $7. Probably safe dividend though.


Results out today and it seems like they only managed $0.09 a share compared with $0.16 of the same period last year. 
Also they have reduced the royalty to encourage new stores to open. 

Seems they are struggling to keep the sales stable. 

Going to sit back and watch this one for the time being. 

That being said this is probably better than some of my holdings which are a little in the risky side.


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## Mall Guy (Sep 14, 2011)

Second Cup suffered some "interesting" ownership challenges when it was spun out of CARA . . . and a look at their last ten years of store openings/closings (Sedar) presents a poor track record (ie they are in the "franchise business" not the "coffee business" . . . at least Tim's and McD's are in the "real estate" business!). . . go into any food court and this is how the coffee sales look . . . Tim's - #1; Starbuck's - 50% of Tim's; Second Cup - 50% of Starbucks; Treat's (et al) - 50% of Second Cup . . . wonder what Stan Ma is going to do with Country Style . . . Robbin's wants to open 200 new stores by 2016, and say what you will about Dunkin' Donut's, "but they sure make a fine corn muffin" ("Spenser for Hire" if you haven't read the books) . . . lots of people buying a job !


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## donald (Apr 18, 2011)

That's what would worry me about second cup(not in the real estate business)The only two places i have seen second cup in is-book stores(ie-dying business,barnes and noble/chapters ect)and malls(ie-online shopping trend)They seem to be latched on to entities that are'nt great.

I can't remember anybody talking about second cup ever in the last 6 yrs....i would'nt touch second cup stock personally.I also would'nt be that interested in stanley ma's company-looking at it from a wide broad perspective.


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## PMREdmonton (Apr 6, 2009)

Second Cup is getting killed by Tim Horton's and Starbucks, IMO. We used to go there for the muffins and cookies but not for the coffee or cold drinks. We only go to Starbucks for those things now and no matter how many locations they have they all seem to be pretty busy with lots of people sitting, a lineup of at least 3 people at all times and at least a couple of cars in the drive thru. They seem to have good avenues for growth in home brewing of beverages, a new beverage regime and ongoing international expansion.

I've taken the recent dip as a chance to try and pick some up by selling in the money put options but I don't know if I'll get them in the end or not. There seems to be a lot of pessimism after a small miss and a small decrease in the outlook. The stock was priced for perfection at 62 and nothing is perfect in this market anymore - not even Apple who now shows weakness for a couple of quarters leading up to their next iphone release. The other thing that has to start getting scary for Apple is they aren't much better than the competition. My wife has an iphone and I have the Galaxy S3 and we have found the Galaxy to be far more useful on our vacation for finding information.

Anyway, back to Second Cup - don't invest in this one. They are 3rd in a 2-horse race. I wouldn't buy them unless they were priced for bankruptcy despite ongoing profitability and a great balance sheet. They need to find a better way to compete with Tim's and SBUX.


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## Freedom45 (Jan 29, 2011)

Looked at it as a yield play a few years back, and passed. Would pass now as well. A dividend is great, but long-term stability means a lot to me. I don't see their future as being as bright as THI/SBUX.


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## Mall Guy (Sep 14, 2011)

PMREdmonton said:


> They are 3rd in a 2-horse race. I wouldn't buy them unless they were priced for bankruptcy despite ongoing profitability and a great balance sheet.They need to find a better way to compete with Tim's and SBUX.


'd 

I'd say 4th, McD has finally gotten serious about coffee . . . can't count them out


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