RFG is a food retailer headquartered in Gold Coast, QLD that operates franchises across Australia and internationally. It has pursued aggressive growth through acquisitions, most recently acquiring Hudson Pacific, which will provide inventory supply to franchises and create a vertical supply chain. The report forecasts RFG's revenue to increase 50% due to Hudson, though increased operating costs are expected to offset profit growth in the near term. The share price is recommended to be a hold.
Retail Food Group - Analysis Report - Group 5Giang Nguyen
Retail Food Group (RFG) operates food franchises and company-owned stores in Australia, New Zealand, and Asia. While macroeconomic factors present challenges, RFG has maintained profitability through market share gains using strategic acquisitions and initiatives. Financially, RFG has enjoyed growth since acquiring Esquire Coffee in 2011. However, two major restructuring projects in 2014 may impact results that year. The report recommends holding the stock until the success of these projects is clear.
From the Desk of the CEO.
The heat is on. While many of us have been vacationing in cooler climes, the Sensex has kept itself rather busy, gaining another 4% during the month of May. The upmove has come largely on the back of better-than-expected corporate results and expectations of a good monsoon. Markets are also taking cognisance of various indicators like improved auto sales, higher steel and cement offtake, public infrastructure spending, etc. which are positive signs of an imminent economic recovery.
Crude prices have silently crept up and are currently hovering at the $50 level, almost double from the January lows. So despite the adverse implications of higher crude prices on the Indian economy, there seems to be some positive correlation between crude prices and the equity markets. Though this pattern may not have always played out in the last few decades, the first few months of 2016 certainly seem to indicate so. The main reason for this is the significantly high weightage that the Energy sector has in indices the world over. When oil plummeted to sub-$30 levels, it seriously impacted the profitability of some of the world’s biggest corporations, not only causing their stock prices to fall sharply, but also impacting the broader markets in general. It also indicated a global recessionary trend, thus affecting investor sentiment and causing them to become nervous and risk-averse. The bounce back in crude has brought the price to a level that makes it profitable for companies to drill, creating a sense of well-being for both, the Energy sector as well as the countries whose economies are dependent solely on oil. Where crude prices go from here remains to be seen.
After several quarters of benign inflation, the WPI rose to 0.34% while retail inflation soared to 5.39% in April 2016. This, coupled with higher oil prices would make it difficult for Governor Rajan to announce a rate cut at the next RBI policy meeting on 7th June. Across the globe however, Janet Yellen’s comments on improving economic data in the US has the markets believing that a rate hike by the US Federal Reserve is a high possibility during its next meeting in mid-June. The outcome of Britain’s referendum on Brexit is also an event that we will be closely watching.
With markets factoring in all the good news for now, conventional logic says that short term investors need to be cautious. But when the stock market catches momentum, all negative predictions may be proven wrong.
There are of course, many more bulls than bears when it comes to a 1 year plus view. Long term investors may continue their investments and look to buy into any dips.
Wish all of you a happy monsoon season.
The document provides an overview of domestic and global economic news from May 16-20, 2016. Some key points:
- India's wholesale price index turned positive after 17 months, suggesting rising pricing power and potential inflation pressures.
- Crude oil and natural gas production in India fell in April compared to the previous year.
- The US dollar strengthened against the yen and euro zone business growth was stable but below recent highs.
- China will further reform business registration procedures to reduce costs and support economic restructuring.
- Most Indian indices declined over the week, with Sensex falling 1.37%, while crude oil prices rose slightly and the rupee depreciated against the US dollar.
Special report 10 apr 2019 epic researchEpic Research
- Wall Street stocks fell as trade tensions rose between the US and Europe. Asian stocks also declined on lowered global growth outlook from IMF.
- Oil prices rose towards 5-month highs supported by OPEC supply cuts and US sanctions on other producers.
- The report provides stock market commentary and analysis, commodity prices and recommendations, and the day's most active options.
- The Indian markets rose over the past week to 6-month highs as the Nifty crossed 8000 levels, driven by encouraging corporate results and expectations of a better monsoon.
- Upcoming events like the RBI policy meeting and UK referendum on EU membership could impact markets and currencies globally.
- Domestically, India aims for 7.6% GDP growth in FY17 while remaining a top steel importer globally.
- Yields on bonds have remained at historically low levels for decades, exposing markets to volatility and posing problems for pension funds that rely on stable returns from bonds.
- Pension funds facing low yields may need to increase contributions from workers and governments or invest in riskier assets like equities to meet liabilities. This could have social ramifications.
- Similarly, low yields make it difficult for insurance companies to meet liabilities through low-risk investments, potentially leading to higher premiums.
Retail Food Group - Analysis Report - Group 5Giang Nguyen
Retail Food Group (RFG) operates food franchises and company-owned stores in Australia, New Zealand, and Asia. While macroeconomic factors present challenges, RFG has maintained profitability through market share gains using strategic acquisitions and initiatives. Financially, RFG has enjoyed growth since acquiring Esquire Coffee in 2011. However, two major restructuring projects in 2014 may impact results that year. The report recommends holding the stock until the success of these projects is clear.
From the Desk of the CEO.
The heat is on. While many of us have been vacationing in cooler climes, the Sensex has kept itself rather busy, gaining another 4% during the month of May. The upmove has come largely on the back of better-than-expected corporate results and expectations of a good monsoon. Markets are also taking cognisance of various indicators like improved auto sales, higher steel and cement offtake, public infrastructure spending, etc. which are positive signs of an imminent economic recovery.
Crude prices have silently crept up and are currently hovering at the $50 level, almost double from the January lows. So despite the adverse implications of higher crude prices on the Indian economy, there seems to be some positive correlation between crude prices and the equity markets. Though this pattern may not have always played out in the last few decades, the first few months of 2016 certainly seem to indicate so. The main reason for this is the significantly high weightage that the Energy sector has in indices the world over. When oil plummeted to sub-$30 levels, it seriously impacted the profitability of some of the world’s biggest corporations, not only causing their stock prices to fall sharply, but also impacting the broader markets in general. It also indicated a global recessionary trend, thus affecting investor sentiment and causing them to become nervous and risk-averse. The bounce back in crude has brought the price to a level that makes it profitable for companies to drill, creating a sense of well-being for both, the Energy sector as well as the countries whose economies are dependent solely on oil. Where crude prices go from here remains to be seen.
After several quarters of benign inflation, the WPI rose to 0.34% while retail inflation soared to 5.39% in April 2016. This, coupled with higher oil prices would make it difficult for Governor Rajan to announce a rate cut at the next RBI policy meeting on 7th June. Across the globe however, Janet Yellen’s comments on improving economic data in the US has the markets believing that a rate hike by the US Federal Reserve is a high possibility during its next meeting in mid-June. The outcome of Britain’s referendum on Brexit is also an event that we will be closely watching.
With markets factoring in all the good news for now, conventional logic says that short term investors need to be cautious. But when the stock market catches momentum, all negative predictions may be proven wrong.
There are of course, many more bulls than bears when it comes to a 1 year plus view. Long term investors may continue their investments and look to buy into any dips.
Wish all of you a happy monsoon season.
The document provides an overview of domestic and global economic news from May 16-20, 2016. Some key points:
- India's wholesale price index turned positive after 17 months, suggesting rising pricing power and potential inflation pressures.
- Crude oil and natural gas production in India fell in April compared to the previous year.
- The US dollar strengthened against the yen and euro zone business growth was stable but below recent highs.
- China will further reform business registration procedures to reduce costs and support economic restructuring.
- Most Indian indices declined over the week, with Sensex falling 1.37%, while crude oil prices rose slightly and the rupee depreciated against the US dollar.
Special report 10 apr 2019 epic researchEpic Research
- Wall Street stocks fell as trade tensions rose between the US and Europe. Asian stocks also declined on lowered global growth outlook from IMF.
- Oil prices rose towards 5-month highs supported by OPEC supply cuts and US sanctions on other producers.
- The report provides stock market commentary and analysis, commodity prices and recommendations, and the day's most active options.
- The Indian markets rose over the past week to 6-month highs as the Nifty crossed 8000 levels, driven by encouraging corporate results and expectations of a better monsoon.
- Upcoming events like the RBI policy meeting and UK referendum on EU membership could impact markets and currencies globally.
- Domestically, India aims for 7.6% GDP growth in FY17 while remaining a top steel importer globally.
- Yields on bonds have remained at historically low levels for decades, exposing markets to volatility and posing problems for pension funds that rely on stable returns from bonds.
- Pension funds facing low yields may need to increase contributions from workers and governments or invest in riskier assets like equities to meet liabilities. This could have social ramifications.
- Similarly, low yields make it difficult for insurance companies to meet liabilities through low-risk investments, potentially leading to higher premiums.
Dear Investors,
The month of July has seen the heavens literally open their doors and shower their blessings on us. After a late start in June, the monsoon picked up
smartly and the country as a whole received abundant rainfall, bringing cheer to one and all and definitely a sense of relief. The same good cheer
seems to have percolated to the global equity markets as well. Having brushed off the Brexit issue, markets have continued their upward move
relentlessly through the month of July. The US benchmark index, the S&P 500 hit a new lifetime high earlier in the month on the back of good jobs
data and an optimistic view of growth in the US economy. Not wanting to be left out in any way, the Nifty set a new 52-week high and the Sensex
scaled 28,000.
The quarterly results have been a mixed bag so far. While there have been more hits than misses, the IT sector as a whole and some pharma
companies have been the major pockets of underperformance. Most of the private sector retail banks and NBFCs have shown a stellar performance,
while growth in public sector banks was stagnant due to liquidity and NPA issues. In the consumer space, lower costs have added to the profits of
several companies, but revenue growth and volume growth were disappointing. There is hope that these will see a significant pick up in the second
half of the financial year once the benefits of the 7th Pay Commission and a good monsoon kick in.
This document provides an overview and outlook across various sectors in the Indian economy and globally. It begins with a note from the CEO discussing current economic conditions and opportunities from innovation and disruption. Several sections then analyze domestic and global equity markets, debt markets, key economic indicators, and provide outlooks for various sectors in India and globally. The document aims to inform investors on current economic and market conditions.
The markets have been struggling to cross the 8000 level on the Nifty lately. If we consider the previous quarter
individually, the markets have given stellar returns. Most of the indices have given double digit returns, mid cap
index has given around 14% returns. We can observe that the market has given absolute returns in the previous
quarter but is finding it difficult to shape up the further movement.
• Going forward, the market will focus on the upcoming news flows. The non corporate macro data still remains
mixed. The CPI numbers have been reported at 5.4%, higher than expectations, but broadly it remains in the
RBIs comfort zone of 5 - 5.5%. The WPI was reported in the positive territory after 17 Months at 0.7%. The bigger
worry currently is the possible delay in monsoons according to a statement by the IMD. If the delay is only by a
week, there is not much a need for worry for the kharif season. If the monsoon is delayed further, that would
impact the inflation further upwards. This in turn would delay the rate cut expected in the next bi monthly policy
meet.
- The equity markets have seen mixed results so far this quarter, with earnings growth improving after 7 quarters of declines but global economic data showing weakness.
- Steel consumption in India fell to its lowest level since 2015, while the government has taken steps to boost job creation and economic growth such as corporate tax cuts.
- Economic data in Europe, the UK, and China continued to disappoint with declines in growth, exports, and imports, while US job growth slowed in April.
The document provides an overview of global market performance and commodity prices. It discusses declines in the Dow and gains in the S&P 500 and Nasdaq on Monday. Asian shares were subdued on Tuesday as investors braced for key events. Oil prices reached their highest since November due to concerns over Libyan exports. The document also provides stock recommendations and analysis of commodity prices and world food prices.
The document provides a weekly summary of economic and financial news from February 15-19, 2016. Key points include:
- The railway and union budgets in India are expected to focus on rural growth and curbing fiscal deficit.
- Global and domestic stock markets were flat or saw small declines over the week.
- The OECD raised India's growth forecast to 7.4% for 2016-2017, citing strong capital expenditures.
- Several major economies including the US and eurozone saw growth forecasts downgraded.
- China reiterated commitments to economic stability amid restructuring.
The document provides a weekly summary of global and domestic economic news and market performance for the week of April 25-29, 2016. Key points include:
- Indian equity markets were mixed as key sectors like automobiles and banks showed selective gains, while the overall markets exhibited signs of exhaustion after strong gains.
- Global markets remained stable as the US Fed did not change interest rates and the Bank of Japan maintained monetary stimulus.
- Domestic manufacturing activity declined to a 4-month low, putting pressure on the RBI to keep rates low. Eurozone factory output grew weakly.
- Chinese economic growth slowed slightly in April as manufacturing expansion was lower than expected, raising doubts about sustained recovery.
Global bond yields are at historical lows which mean global bond prices have rallied across developed markets while S&P 500 is close to its historical high. This by itself is a dichotomy as bond prices and equity prices are not expected to rally together at the same point. Either of the two has to be true.
•Bond prices and yields are inversely related therefore, bond prices rally when yields and interest rates are expected to be low. Interest rates are expected to be low because growth prospects are low. This would entail the central banks to cut rates and because the demand for credits will be low due to the low growth prospects, the yields are expected to be low which explains the rally in bond prices. Considering this, the rally in the equity markets is not possible as there is no expectation for growth. This is the dichotomy that the global world is at particularly in the developed markets. In the light of the current scenario, either of the two has to give in i.e. either bond prices correct leading to normalcy in yields or equity markets give in.
This document provides a weekly summary of economic, market, and other news from August 16-19, 2016. Some key points:
- India's CPI inflation rose above 6% in July, exceeding the central bank's tolerance limit and raising expectations of further rate hikes.
- Global government bond yields increased modestly, with the US 10-year yield rising to 1.6%, while oil prices fell on doubts that upcoming producer talks would reduce oversupply.
- Domestically, strong monsoon rains are expected to boost agricultural growth and the overall economy. Internationally, China's exports declined in 2016 and are projected to fall further due to economic pressures.
The document provides a research report from Krause Fund recommending Alcoa Inc. (NYSE: AA) as a strong buy. It summarizes Alcoa's business operations, current stock performance, financial ratios, and provides an analysis of key economic indicators and how they may impact Alcoa's future performance. The analysts initiate coverage with a buy rating and $18-20 price target due to Alcoa's shift toward more profitable downstream products, potential for market share gains, and expectations that recent restructuring efforts will allow it to execute on goals leading to long term share gains.
The document provides an overview and outlook on domestic and global financial markets. It discusses the CEO's positive outlook on the Indian equity market rally and fiscal reforms. On the domestic front, it summarizes inflation trends, industrial growth, bond yields, and provides recommendations on debt strategies. Globally, it reviews equity market performance and updates on major economies. The overall document aims to advise investors by analyzing economic and market conditions.
The document provides an overview and outlook across various asset classes and sectors in India and globally. Some key points:
- Domestic equity markets have seen modest gains of around 8.5% year-to-date despite recent volatility due to political tensions. Bond yields have fallen in India on expectations of further rate cuts.
- Global central banks like the Fed and ECB appear less accommodative but the US economy remains resilient. Growth has slowed in Japan and parts of Europe.
- Automobiles, banks, FMCG and infrastructure sectors are expected to perform well in India, while cement may see a recovery. Select domestic sectors and stocks still appear attractive relative to other emerging markets.
This document provides a weekly summary of global and domestic economic news and market performance for the week of August 8-12, 2016. Some key points:
- India's wholesale and consumer price inflation increased in July driven by higher food prices. Industrial production growth slowed in the Eurozone and China.
- US retail sales were flat in July and the budget deficit declined, while China's economic growth slowed with the weakest investment growth in over 15 years.
- The Indian stock market ended the week slightly lower, with the Sensex falling 0.11%. Most sectoral indices also declined over the week except for banking. Commodity prices were mixed with gold falling slightly while crude oil rose.
- The document provides an economic and market summary for the week of November 14-18, 2016. It discusses developments in global markets, the Indian economy and stock market, and provides commentary on sectors and asset classes.
- Key points include the expectation of US Federal rate hikes in December, the impact of India's demonetization on various industries, and an outlook that Indian stock markets will see further declines in the short-term but provide buying opportunities. Debt markets are also seen as favorable due to expected interest rate cuts.
The document summarizes recent news and developments in global markets and the Indian economy from October 31 - November 4, 2016. It discusses the impact of the FBI announcement regarding Hillary Clinton's emails on US and global markets. It also covers the upcoming US presidential election and its potential effects. Domestically, it discusses recent inflation data, bank earnings, and the progress of GST implementation in India. Globally, it mentions recent economic data and central bank decisions in the US, UK, Eurozone, and China.
This document provides an overview and outlook across various sectors in India and globally. It discusses domestic and global economic factors, equity and debt market performance, sector-specific views, and other relevant topics. Key points include a positive outlook for domestic consumption sectors due to the festive season, signs of recovery in the Indian manufacturing sector, and expectations that global central banks will continue accommodative monetary policies.
- Last week, global equity markets declined sharply due to one bad trading day that rattled investors who had become complacent about continuously rising prices. However, market corrections of 6-8% are normal and investors should focus on investing in good quality stocks during declines rather than withdrawing.
- Concerns remain about instability in Europe's banking system, uncertainty around US interest rates after the election, and potential for Chinese currency devaluation. Wholesale inflation slowed in India while the government may increase public spending to spur growth.
- Key stock indices declined over the past week with the Sensex falling 1.46% while most sectors also ended lower with metals and power dropping the most.
The document provides an economic and market summary for the week of July 18-22, 2016. Key points include:
- Momentum stocks should be exited and defensive investments pursued as markets may be volatile.
- The IMF lowered India's GDP growth forecast to 7.4% for the current fiscal year.
- Greece relaxed some capital controls as bailout reforms progress and banking confidence returns.
- Central banks will remain cautious on policy moves pending clarity on Brexit's economic impacts.
- Core inflation in India declined to 4.5% in June from 4.7% previously, which may support a 25 basis point rate cut by the RBI in August. Industrial growth also turned positive in April after contracting previously.
- Financial results from companies so far have been better than expected, though IT sector disappointed due to Brexit. Global markets are focused on upcoming earnings season in India.
- The Bank of England is expected to cut rates to a record low of 0.25% to cushion the UK economy from Brexit shock. China's land and wage growth slowed in the first half of 2016 due to overcapacity issues.
The document provides an equity market and economic overview for the week of April 18-22, 2016. Some key points:
- Q4 company results were broadly in line with expectations, and results this season may be similar or slightly higher.
- Banks that received regulatory relief from the RBI on recognizing bad assets saw sharp rallies, but their fundamentals have not changed. Investors should not buy into these banks based on the RBI's leeway.
- Globally, disappointing results from Microsoft and tepid growth from Google do not bode well for markets and may lead to selling pressure. The current market can be viewed as a "buy on decline" scenario.
The document discusses the case for Australian interest rates to remain unchanged despite market expectations of a rate cut. It argues that while markets are pricing in a rate cut by year-end, the author believes rates will remain on hold over the remainder of 2015 and 2016 based on several factors: the RBA now seems comfortable with the level of the Australian dollar following its fall; the upcoming GDP report is not expected to show a significant economic slowdown; and strong employment growth suggests the RBA's unemployment rate outlook may be accurate. The author maintains their view that Australian rates will stay on hold, contrary to current market pricing.
This document provides an analysis of macroeconomic conditions and portfolio recommendations. It analyzes the national economies of the US, Asia, and Europe, finding overall recovery but some weaknesses. International factors like declining commodity prices and tight financial conditions are noted. The document then assesses industries, provides interest and exchange rate forecasts, evaluates specific securities, and recommends a diversified portfolio allocation and hedging strategies to achieve the target 5.78% return over 5 years for retirement investors.
Dear Investors,
The month of July has seen the heavens literally open their doors and shower their blessings on us. After a late start in June, the monsoon picked up
smartly and the country as a whole received abundant rainfall, bringing cheer to one and all and definitely a sense of relief. The same good cheer
seems to have percolated to the global equity markets as well. Having brushed off the Brexit issue, markets have continued their upward move
relentlessly through the month of July. The US benchmark index, the S&P 500 hit a new lifetime high earlier in the month on the back of good jobs
data and an optimistic view of growth in the US economy. Not wanting to be left out in any way, the Nifty set a new 52-week high and the Sensex
scaled 28,000.
The quarterly results have been a mixed bag so far. While there have been more hits than misses, the IT sector as a whole and some pharma
companies have been the major pockets of underperformance. Most of the private sector retail banks and NBFCs have shown a stellar performance,
while growth in public sector banks was stagnant due to liquidity and NPA issues. In the consumer space, lower costs have added to the profits of
several companies, but revenue growth and volume growth were disappointing. There is hope that these will see a significant pick up in the second
half of the financial year once the benefits of the 7th Pay Commission and a good monsoon kick in.
This document provides an overview and outlook across various sectors in the Indian economy and globally. It begins with a note from the CEO discussing current economic conditions and opportunities from innovation and disruption. Several sections then analyze domestic and global equity markets, debt markets, key economic indicators, and provide outlooks for various sectors in India and globally. The document aims to inform investors on current economic and market conditions.
The markets have been struggling to cross the 8000 level on the Nifty lately. If we consider the previous quarter
individually, the markets have given stellar returns. Most of the indices have given double digit returns, mid cap
index has given around 14% returns. We can observe that the market has given absolute returns in the previous
quarter but is finding it difficult to shape up the further movement.
• Going forward, the market will focus on the upcoming news flows. The non corporate macro data still remains
mixed. The CPI numbers have been reported at 5.4%, higher than expectations, but broadly it remains in the
RBIs comfort zone of 5 - 5.5%. The WPI was reported in the positive territory after 17 Months at 0.7%. The bigger
worry currently is the possible delay in monsoons according to a statement by the IMD. If the delay is only by a
week, there is not much a need for worry for the kharif season. If the monsoon is delayed further, that would
impact the inflation further upwards. This in turn would delay the rate cut expected in the next bi monthly policy
meet.
- The equity markets have seen mixed results so far this quarter, with earnings growth improving after 7 quarters of declines but global economic data showing weakness.
- Steel consumption in India fell to its lowest level since 2015, while the government has taken steps to boost job creation and economic growth such as corporate tax cuts.
- Economic data in Europe, the UK, and China continued to disappoint with declines in growth, exports, and imports, while US job growth slowed in April.
The document provides an overview of global market performance and commodity prices. It discusses declines in the Dow and gains in the S&P 500 and Nasdaq on Monday. Asian shares were subdued on Tuesday as investors braced for key events. Oil prices reached their highest since November due to concerns over Libyan exports. The document also provides stock recommendations and analysis of commodity prices and world food prices.
The document provides a weekly summary of economic and financial news from February 15-19, 2016. Key points include:
- The railway and union budgets in India are expected to focus on rural growth and curbing fiscal deficit.
- Global and domestic stock markets were flat or saw small declines over the week.
- The OECD raised India's growth forecast to 7.4% for 2016-2017, citing strong capital expenditures.
- Several major economies including the US and eurozone saw growth forecasts downgraded.
- China reiterated commitments to economic stability amid restructuring.
The document provides a weekly summary of global and domestic economic news and market performance for the week of April 25-29, 2016. Key points include:
- Indian equity markets were mixed as key sectors like automobiles and banks showed selective gains, while the overall markets exhibited signs of exhaustion after strong gains.
- Global markets remained stable as the US Fed did not change interest rates and the Bank of Japan maintained monetary stimulus.
- Domestic manufacturing activity declined to a 4-month low, putting pressure on the RBI to keep rates low. Eurozone factory output grew weakly.
- Chinese economic growth slowed slightly in April as manufacturing expansion was lower than expected, raising doubts about sustained recovery.
Global bond yields are at historical lows which mean global bond prices have rallied across developed markets while S&P 500 is close to its historical high. This by itself is a dichotomy as bond prices and equity prices are not expected to rally together at the same point. Either of the two has to be true.
•Bond prices and yields are inversely related therefore, bond prices rally when yields and interest rates are expected to be low. Interest rates are expected to be low because growth prospects are low. This would entail the central banks to cut rates and because the demand for credits will be low due to the low growth prospects, the yields are expected to be low which explains the rally in bond prices. Considering this, the rally in the equity markets is not possible as there is no expectation for growth. This is the dichotomy that the global world is at particularly in the developed markets. In the light of the current scenario, either of the two has to give in i.e. either bond prices correct leading to normalcy in yields or equity markets give in.
This document provides a weekly summary of economic, market, and other news from August 16-19, 2016. Some key points:
- India's CPI inflation rose above 6% in July, exceeding the central bank's tolerance limit and raising expectations of further rate hikes.
- Global government bond yields increased modestly, with the US 10-year yield rising to 1.6%, while oil prices fell on doubts that upcoming producer talks would reduce oversupply.
- Domestically, strong monsoon rains are expected to boost agricultural growth and the overall economy. Internationally, China's exports declined in 2016 and are projected to fall further due to economic pressures.
The document provides a research report from Krause Fund recommending Alcoa Inc. (NYSE: AA) as a strong buy. It summarizes Alcoa's business operations, current stock performance, financial ratios, and provides an analysis of key economic indicators and how they may impact Alcoa's future performance. The analysts initiate coverage with a buy rating and $18-20 price target due to Alcoa's shift toward more profitable downstream products, potential for market share gains, and expectations that recent restructuring efforts will allow it to execute on goals leading to long term share gains.
The document provides an overview and outlook on domestic and global financial markets. It discusses the CEO's positive outlook on the Indian equity market rally and fiscal reforms. On the domestic front, it summarizes inflation trends, industrial growth, bond yields, and provides recommendations on debt strategies. Globally, it reviews equity market performance and updates on major economies. The overall document aims to advise investors by analyzing economic and market conditions.
The document provides an overview and outlook across various asset classes and sectors in India and globally. Some key points:
- Domestic equity markets have seen modest gains of around 8.5% year-to-date despite recent volatility due to political tensions. Bond yields have fallen in India on expectations of further rate cuts.
- Global central banks like the Fed and ECB appear less accommodative but the US economy remains resilient. Growth has slowed in Japan and parts of Europe.
- Automobiles, banks, FMCG and infrastructure sectors are expected to perform well in India, while cement may see a recovery. Select domestic sectors and stocks still appear attractive relative to other emerging markets.
This document provides a weekly summary of global and domestic economic news and market performance for the week of August 8-12, 2016. Some key points:
- India's wholesale and consumer price inflation increased in July driven by higher food prices. Industrial production growth slowed in the Eurozone and China.
- US retail sales were flat in July and the budget deficit declined, while China's economic growth slowed with the weakest investment growth in over 15 years.
- The Indian stock market ended the week slightly lower, with the Sensex falling 0.11%. Most sectoral indices also declined over the week except for banking. Commodity prices were mixed with gold falling slightly while crude oil rose.
- The document provides an economic and market summary for the week of November 14-18, 2016. It discusses developments in global markets, the Indian economy and stock market, and provides commentary on sectors and asset classes.
- Key points include the expectation of US Federal rate hikes in December, the impact of India's demonetization on various industries, and an outlook that Indian stock markets will see further declines in the short-term but provide buying opportunities. Debt markets are also seen as favorable due to expected interest rate cuts.
The document summarizes recent news and developments in global markets and the Indian economy from October 31 - November 4, 2016. It discusses the impact of the FBI announcement regarding Hillary Clinton's emails on US and global markets. It also covers the upcoming US presidential election and its potential effects. Domestically, it discusses recent inflation data, bank earnings, and the progress of GST implementation in India. Globally, it mentions recent economic data and central bank decisions in the US, UK, Eurozone, and China.
This document provides an overview and outlook across various sectors in India and globally. It discusses domestic and global economic factors, equity and debt market performance, sector-specific views, and other relevant topics. Key points include a positive outlook for domestic consumption sectors due to the festive season, signs of recovery in the Indian manufacturing sector, and expectations that global central banks will continue accommodative monetary policies.
- Last week, global equity markets declined sharply due to one bad trading day that rattled investors who had become complacent about continuously rising prices. However, market corrections of 6-8% are normal and investors should focus on investing in good quality stocks during declines rather than withdrawing.
- Concerns remain about instability in Europe's banking system, uncertainty around US interest rates after the election, and potential for Chinese currency devaluation. Wholesale inflation slowed in India while the government may increase public spending to spur growth.
- Key stock indices declined over the past week with the Sensex falling 1.46% while most sectors also ended lower with metals and power dropping the most.
The document provides an economic and market summary for the week of July 18-22, 2016. Key points include:
- Momentum stocks should be exited and defensive investments pursued as markets may be volatile.
- The IMF lowered India's GDP growth forecast to 7.4% for the current fiscal year.
- Greece relaxed some capital controls as bailout reforms progress and banking confidence returns.
- Central banks will remain cautious on policy moves pending clarity on Brexit's economic impacts.
- Core inflation in India declined to 4.5% in June from 4.7% previously, which may support a 25 basis point rate cut by the RBI in August. Industrial growth also turned positive in April after contracting previously.
- Financial results from companies so far have been better than expected, though IT sector disappointed due to Brexit. Global markets are focused on upcoming earnings season in India.
- The Bank of England is expected to cut rates to a record low of 0.25% to cushion the UK economy from Brexit shock. China's land and wage growth slowed in the first half of 2016 due to overcapacity issues.
The document provides an equity market and economic overview for the week of April 18-22, 2016. Some key points:
- Q4 company results were broadly in line with expectations, and results this season may be similar or slightly higher.
- Banks that received regulatory relief from the RBI on recognizing bad assets saw sharp rallies, but their fundamentals have not changed. Investors should not buy into these banks based on the RBI's leeway.
- Globally, disappointing results from Microsoft and tepid growth from Google do not bode well for markets and may lead to selling pressure. The current market can be viewed as a "buy on decline" scenario.
The document discusses the case for Australian interest rates to remain unchanged despite market expectations of a rate cut. It argues that while markets are pricing in a rate cut by year-end, the author believes rates will remain on hold over the remainder of 2015 and 2016 based on several factors: the RBA now seems comfortable with the level of the Australian dollar following its fall; the upcoming GDP report is not expected to show a significant economic slowdown; and strong employment growth suggests the RBA's unemployment rate outlook may be accurate. The author maintains their view that Australian rates will stay on hold, contrary to current market pricing.
This document provides an analysis of macroeconomic conditions and portfolio recommendations. It analyzes the national economies of the US, Asia, and Europe, finding overall recovery but some weaknesses. International factors like declining commodity prices and tight financial conditions are noted. The document then assesses industries, provides interest and exchange rate forecasts, evaluates specific securities, and recommends a diversified portfolio allocation and hedging strategies to achieve the target 5.78% return over 5 years for retirement investors.
- The Total Asset Partners portfolio returned 1.54% for Q3 and 6.27% year-to-date, outperforming fixed income but lagging the S&P 500 while maintaining lower volatility.
- The portfolio remains defensively positioned with 35% in equities, 45% in fixed income, and 19.4% in cash as valuations across asset classes appear expensive and economic growth remains weak.
- Key concerns include declining corporate profits, high debt levels, the risk of higher interest rates, deteriorating high yield credit fundamentals, and expensive equity valuations leaving little room for further expansion.
The document provides a quarterly review by Seaport Investment Management. It summarizes the volatile market conditions in Q1 2016, with global equities rebounding from losses to end barely positive. It discusses ongoing economic slowing and downward revisions to growth forecasts. Seaport's portfolio returned 2.2% in Q1 through a defensive structure that has buffered volatility while providing stable income. The portfolio remains defensively positioned across asset classes like equity, credit, and mortgage to balance upside potential with downside protection.
The report provides an overview of macroeconomic trends and outlooks for various regions and sectors. For the domestic economy, while facing some headwinds, growth is expected to continue in 2016 driven by strong consumer spending. In Europe, recovery is expected to continue but at a slow pace due to global uncertainties. China is undergoing an economic transition and growth is projected to slow, posing risks globally. Emerging markets face challenges from China's slowdown and commodity price declines but conditions are projected to improve in 2016.
1. The Australian equity market has increased 24% from its March low but remains below levels from three years ago. The report predicts continued bull market conditions with the All Ordinaries index reaching 3,650, implying almost 15% total returns over the next 12 months.
2. Small cap stocks have outperformed recently but now appear relatively expensive. Overall, the market appears fairly valued based on the "rule of 20" and prospective earnings yield relative to bonds.
3. The consensus view is that stronger world growth may benefit resources over banks, but the report finds resource stocks trading at higher valuations and lower yields compared to the major banks. The portfolios recommended overweight banks and include only one major miner.
The document provides outlooks from leaders of Franklin Templeton on the global macro environment, global equities, and multi-strategy solutions. It includes the following key points:
- Michael Hasenstab discusses expectations for continuing US economic growth and rising interest rates from the Fed, while the BOJ and ECB maintain quantitative easing. Emerging markets show differences that will be magnified by US rate hikes.
- Ed Perks oversees equity teams that share insights across markets to strengthen convictions.
- Rick Frisbie's group incorporates long-term capital market expectations into portfolio positioning for the next 5-10 years.
Laurentian Bank Securities - Economic Research and Strategy Mark MacIsaac
LBS Asset Allocation Model – September Update:
Global economic data remained robust in August and continue to point to solid, broad-based and synchronized economic expansion. Financial conditions also remain easy and still provide a supportive environment for economic growth.
After two years of recession, Russia's economy is projected to return to growth in 2017 as higher wages boost consumption and lower interest rates support investment. However, structural issues continue to hinder diversification, and the recovery remains dependent on stable oil prices. Fiscal and monetary policy should be further eased to support the recovery, though fiscal space is limited without economic reforms. The strength of the recovery will be constrained by a lack of structural reforms and poor business climate inhibiting diversification from oil.
The document summarizes the performance of ASEAN consumer stocks in 2Q15 and provides an outlook. Key points:
- 2Q15 earnings disappointed with 41% of stocks reporting results below expectations, similar to 1Q15. Disappointments were due to slower growth, currency impacts, and margin contraction.
- The author's 2015 aggregate growth forecast was lowered to 6% from 12% previously due to lowered GDP forecasts and subdued management outlooks following lackluster earnings.
- The author has adopted a less cautious stance than previous months as expectations have moderated, but does not expect a significant earnings pickup in 3Q15 as consumer sentiment remains subdued.
LBS Asset Allocation August Update - July 28, 2017Mark MacIsaac
Global economic data continues to show strong growth, but signs point to a peak in momentum. While US and Eurozone manufacturing surveys weakened, emerging market equities continue outperforming. Key indicators like flattening yield curves and disconnect between commodities and the US dollar suggest growth is likely decelerating. The document recommends slightly increasing exposure to emerging market equities and reducing underweight of other developed markets. It also recommends overweighting health care in the US and financials in Canada.
The document provides Bangladesh Bank's monetary policy stance for the first half of fiscal year 2017 from July to December 2016. Some key points:
- Broad money growth is projected at 15.5% to support the GDP growth target of 7.2% while keeping inflation near the 5.8% target.
- Private sector credit growth is targeted at 16.5% to support the economy, while credit to the public sector is projected to grow 15.9%.
- Inflation has been declining and was 5.92% in June 2016, but non-food inflation is rising due to wage increases, requiring vigilance.
- Policy interest rates will remain unchanged at 6.75% for repo
The document provides an analysis of the Indian economy and markets in light of recent volatility driven by expectations of tapering of US Federal Reserve stimulus. It summarizes that weakening of the rupee will increase fiscal deficits and hurt growth. GDP growth is projected to slow further in the short term. Downgrades are possible for both GDP and corporate earnings forecasts. Volatility is expected to continue until the Fed's policy decision is clear.
Stanford Endowment Fund - Asset AllocationKUN YANG
This document provides a summary of the Riesling Fonds portfolio for the Stanford Endowment Fund. It analyzes the current economic outlook for the US, Eurozone, Germany and China. For the US, moderate growth is expected along with an interest rate hike. Inflation is near the target. The Eurozone faces sluggish growth and inflation remains below target. Germany's economy is stable with growth around 2% supported by manufacturing. China is transitioning to a consumption-based economy with growth slowing to 6-6.5%. The portfolio targets global diversification across asset classes including public and private equities, absolute return, natural resources, real estate and fixed income.
The document provides an economic update and discusses developments in several regions including Australia, the US, Europe, the UK, China, and Japan. Key points include:
- Australian property investors were the focus of additional lending restrictions from banks and regulators. Population growth is supporting the Australian economy, particularly in Sydney and Melbourne.
- The US labor market remains tight and wage growth is increasing, putting pressure on inflation. Uncertainty remains around future policy from the Trump administration.
- Eurozone economic data shows continued strengthening, but inflation remains below target. Monetary policy normalization will be a gradual process.
- UK retail sales rebounded in February but consumer spending power faces pressure from inflation. Business surveys remain strong despite
ChoiceBroking - Q2FY16 GDP growth at 7.4%; robust manufacturing expansion indicates revival in economic scenario. To read our monthly economic outlook please click here http://bit.ly/1QTqJKI
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Inflation in Nigeria rose to 8.7% in July 2013, driven by increases in food and core inflation. The Central Bank expects inflation to remain in the single digits for the second half of the year if monetary policy stays tight. However, volatility in the naira exchange rate poses a threat to this outlook. The 50% cash reserve ratio on public sector deposits has tightened liquidity and increased interest rates in the banking system. Yields on government bonds have compressed slightly as demand increases, but headwinds remain from potential changes to US monetary policy. Institutional investors are advised to take advantage of current high rates by locking in returns before conditions change.
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1. The following report offers a detailed insight into
Retail Food Group (RFG). RFG is a food retailer
that provides the majority of its services to the
Australian market. The firms head office is
located in the Gold Coast, QLD.
Our report gives an in-depth insight into
macroeconomic factors, the industries that RFG
operates in as well as a firm level analysis.
Our findings have shown that the company has
been on an aggressive path, led by acquisitions of
Gloria Jean’s and most recently Hudson Pacific.
The firm has consistently returned a revenue and
profit increase year on year. RFG’s increase in
revenue and profit both outstrip the average
growth of the Australian economy, as well as the
food industry as a whole.
The recent announcement regarding the Hudson
Pacific acquisition has given RFG a solid base to
build its future on. Being able to supply inventory
to its franchises gives the firm a great vertical
supply chain. Due to this we have forecast
revenues to increase by 50%, though we are largely expecting this to be offset by increased
operating costs.
We have forecasted the firms NPAT to be 1.6% higher this coming fiscal year (FY2017) due
to the costs associated with the Hudson acquisition. We expect NPAT to grow at circa 15%
the following two years as RFG is able to see the full benefits from the Hudson acquisition.
Our forecast gives a target share range of $6.30 - $6.60, and as such we currently believe
the security is a hold.
EFN415 – Queensland University of Technology Page 1
Current Share Price $6.55
52Week high $7.17
52Week low $3.98
Market Capitalisation $1.08B
16th September, 2016
Retail Food Group LTD
RFG.ASX
Price Performance As of 12/09/2016
2. Table of Contents
Table of Contents...................................................................................................................................2
ECONOMIC ANALYSIS - MARKET SUMMARY.........................................................................................3
Gross Domestic Product....................................................................................................................3
Interest Rates....................................................................................................................................4
Inflation Rates...................................................................................................................................5
Unemployment Rates........................................................................................................................5
Australian Consumer Confidence......................................................................................................6
INDUSTRY ANALYSIS..............................................................................................................................7
Porter’s Five Forces Analysis..............................................................................................................7
Threat of Existing Competitors......................................................................................................7
Threat of New Entrants..................................................................................................................9
Threat of Substitute Products........................................................................................................9
Threat of Bargaining Power of Buyers.........................................................................................10
COMPANY ANALYSIS............................................................................................................................10
Company Profile..............................................................................................................................10
Key Executives.............................................................................................................................12
COMPANY STRATEGY.......................................................................................................................12
Competitive Strategy...................................................................................................................12
Recent Highlights.........................................................................................................................12
Business Strategy.........................................................................................................................12
SWOT Analysis.................................................................................................................................13
VALUATION..........................................................................................................................................15
Buy, Sell or Hold Recommendation.....................................................................................................18
Appendix..............................................................................................................................................19
References...........................................................................................................................................20
............................................................................................................................................................20
EFN415 – Queensland University of Technology Page 2
3. ECONOMIC ANALYSIS - MARKET SUMMARY
Gross Domestic Product
Risk: Neutral – Positive Outlook: 3.3%-3.6%
After the Global Financial Crisis in 2007
the world has experienced slow growth.
Its impact is still being experienced today
in some parts. In addition to this, during
the World Economic Outlook forum of
2016 the International Monetary Fund
(IMF) stated that annual growth for both
the United States of America (USA) and
Europe has been shown to be slowing.
Despite this, the global economy has
continued to grow, albeit at a slower
than average pace and is predicted to
grow at 3.8% for 2017 (IMF, 2016).
Commodity prices have recently trended
upwards which is a positive sign for the
global economy as well as the Australian
economy which is heavily dependent on commodities.
According to the official Reserve Bank of Australia (RBA) figures, the Australian economy
grew by 3.1% in 2016 compared to 2.9% in 2015. It is the largest percentage expansion since
2012. The Australian Bureau of Statistics (ABS, 2016) says that an increase in both
household consumption expenditure and public gross fixed capital formation has been the
major drivers for this growth. Although there have not been significant contributions from
net exports, the Australian dollar has been
able to retain its strong position. Gross
domestic product (GDP) is slightly higher than
RBA forecasts for the third quarter and GDP
growth rate has risen above forecasts to
3.30%. This increase is most likely due to the
fact that the domestic economy has begun to
advance from the mining collapse as well as
seeing the benefits from the aforementioned
improving commodity prices.
EFN415 – Queensland University of Technology Page 3
Figure 1
Figure 2
4. Our outlook is neutral-positive as household consumption and public capital formation are
currently negating the risk associated with the end of the mining boom. In the short term
our outlook has used the IMF projections. Our longer term view uses the Organisation for
Economic Cooperation and Development (OECD) forecasted growth. The growth that was
projected is 3.0% - 3.2% for the Australian economy and a global growth target of 3.5% -
3.8%. These forecast ranges are an estimate for the next fifteen years.
Interest Rates
Risk: Positive Outlook – Easing bias
The RBA met on the 6th of September, 2017 and decided to leave the official cash rate
unchanged at 1.50%. The RBA had made a
number of observations around the global
economy and how it was tracking. Funding
costs for borrowers remain low, as evident by
the record low cash rate and the monetary
policies around the world remain
accommodative.
As at the 9th
September, the Cash Rate
Futures implied yield curve shows a 76%
current market expectation of a potential
further rate cut by September 2017. This can
be seen as an easing bias in market
expectations. Our outlook takes this bias into
consideration.
EFN415 – Queensland University of Technology Page 4
Figure 3
Figure 4
5. Inflation Rates
Risk: Low Outlook: 1.5%-2.5%
The recent outlook on employment rates and
wage growth has a tendency to push down
inflation. Nonetheless, the depreciation in
the exchange rate is likely to have upward
pressure on inflation rates in the Australian
economy. These two effects are expected to
offset one another. Therefore, we forecast
that inflation at the end of this year is
forecast to remain moderate. According to
the indexes that are released on a quarterly
basis by the ABS, consumer prices in
Australia rose 1.0% in the quarter ending
June 2016. This was down 0.3% from 1.3% in
the previous quarter and slightly below
market consensus, as well as being below the
RBA’s target range of 2%-3%. As economic
growth improves it would be expected that inflation rises back toward the target range.
Our outlook considers the RBA current inflation and the RBA’s targeted inflation rate range
of between 2%-3%.
Unemployment Rates
Risk: Low-Medium Outlook: Steady
Unemployment rates around the world vary significantly. Data released by The World Bank,
show the stark contrast in these rates. They have unemployment rates at 4.9% in the USA
but 10.1% for the Eurozone. Australia's unemployment rate has been relatively stable until
a sudden drop to 5.7% in July 2016. This is below the forecasts of 5.9% (ABS, 2016).
Continued economic growth combined with both low inflation and interest rates should see
unemployment rates remain steady in the near to medium term.
EFN415 – Queensland University of Technology Page 5
Figure 5
6. Australian Consumer Confidence
Risk: Medium Outlook: Steady to positive
The Westpac-Melbourne Institute Consumer Sentiment Index for Australia rose 2% to 101 in
August of 2016, compared to a 3% drop in July. The public expectations of economic
conditions over the next 12 months increased by 3.5%. This increase followed the Consumer
Sentiment Index with a sharp decline a month earlier. Both point to an improving consumer
sentiment.
Further evidence of improving consumer confidence is show by the likelihood of consumers
to undertake large purchases. The measure of whether this was a “Good Time to Buy Major
Household Items” was up by 1.6%. For housing, 'The Time to Buy a House' index jumped to
10.1%. This was a strong performance after the index fell 1.8% in July. Despite these
positive outlooks consumer’s view on the outlook over the next 5 years dipped marginally
by 0.7% (University of Melbourne, 2016). We believe that this decline in longer term
consumer sentiment could have been caused by negative news stories about the end of the
mining boom. With continued growth and falling unemployment it would be expected that
this outlook would improve.
EFN415 – Queensland University of Technology Page 6
7. INDUSTRY ANALYSIS
Along with the growing economy, consumer spending has been forecast to increase over
the next few quarters as the benefits of the last RBA rate cut are passed (partially) onto
borrowers. The chance of a further rate drop and improving consumer confidence survey
results suggests that consumer consumption will remain strong.
Consumer trends drive performance in the industry sectors that RFG has their portfolio of
brands. Of the consumer discretionary market, RFG operates in three main markets; Bread
and Cake Retailing, Café and Coffee Shops and Fast Food Services.
Industry RFG Market Share Market Size FY2016 Growth Forecast Growth
Bread and Cake 21.50% $753m 1.80% 1.40%
Coffee Shops 16.50% $2,400m 3.80% 3.70%
Fast Food >1% $19,300m 3.90% 1.50%
Figure 6
As shown in Figure 6, the highest rate of forecast growth in the coffee shop industry. RFG
through the acquisition of Gloria Jeans are a significant player in this market. RFG have no
stated plans to expand in the fast food industry which despite its size is forecasting
significantly slower then previously.
Porter’s Five Forces Analysis
Outlook: Does not support long term growth above GDP rates.
Threat of Existing Competitors
Risk: High
The RFG brands of Crust and Pizza Capers have
faced significant competitor pressures. This
has seen strong competitors in Domino’s and
Pizza Hut battling for market share. Domino’s
price, product differentiation and
improvements in ordering have helped them
surged in the market to comfortably take top
spot of pizza chains, gaining 4.8% of the Fast
Food Services Industry according to their
annual report. RFG have stated they do not
wish to compete on price, instead relying on
product quality as the unique competitive
advantage.
EFN415 – Queensland University of Technology Page 7
Figure 7
8. Industry reports indicate that the recent acquisition of Gloria Jeans increased RFG’s market
share in the Coffee Shop industry to 16.5%, making RFG a clear industry leader in a market
that is traditionally characterised by low levels of market share and discerning tastes among
consumers. Gloria Jeans was acquired after facing significant competition from another
global competitor in Starbucks who after closing underperforming stores, has sold its
Australian business rights to the parent company of 7-Eleven. RFG have however improved
on the traditional coffee shop distribution by acquiring Cafe2U (mobile coffee vans) and
Coffee Nation, which is an operator of more than 1000 self-service coffee machines.
There are a number of competitive moves in which a company is able to respond to
competitors to gain an advantage.
• Changes in prices – a company is able to change prices up or down in order to gain
some sort term advantages over the market. RFG have demonstrated an ability to
occupy the premium end of their market. This is evidenced by their lack of
willingness to compete on price in the gourmet pizza market. By undertaking vertical
acquisitions, RFG maybe able to provide buffers against rival price wars. A rival who
discounts still has to purchase raw materials and will still have to meet the demand
of the suppliers and their price. With the acquisition of Hudson’s RFG controls
significant portions of their supply chain and may have the ability to reduce price
beyond the scale of many other rivals.
• Improve product differentiation – RFG has stated that they are increasing franchise
independence to encourage product innovation. RFG have released a number of
concept stores which it has begun to roll out to significantly improve the consumer
experience. Whilst we recognise the potential to improve based on store fit out, the
brands that RFG own are not known for their menu rotation.
• Creatively using channels of distribution – As evidenced by the purchase of mobile
coffee distributors, and the possibility of drive through coffee service, RFG shows
innovation in their coffee business. Outside of this part of the business, RFG has
largely remained a traditional retailer in the remaining business sectors in which it
operates.
• Exploiting relationships with suppliers - RFG have a stated goal of becoming vertically
integrated which they believe will deliver greater control over product development,
cost and quality which they believe will give them a competitive advantage
EFN415 – Queensland University of Technology Page 8
9. Threat of New Entrants
Risk: High
In the coffee shop industry, market research performed by IbisWorld shows competition is
high and the trend is increasing. In addition, the industry is subject to external competition
from other hospitality industry such as restaurants and convenience stores. The industry
possess low barriers to entry due to the low start-up costs, and is also reflected in the high
fragmentation in the market as whole. In terms of life cycle stage, the coffee industry is in a
growth phase. This will increase the attractiveness of this industry to new competitors. This
all points to the threat of new entrants being high.
Retailing in bread and cakes shows a medium level of competition with an increasing trend.
Fragmentation remains high and competition generally focuses on price and product range,
with factors such as health benefits and dietary requirements gaining prominence. Product
expansion amongst supermarkets and convenience stores poses a threat to RFG as well as
the café and coffee shop industries expanding into cakes, pastries and sweetbreads. The life
cycle of this industry is in a mature stage which will limit the attractiveness to new
competitors. Overall the risks of other industries expanding product ranges into traditional
products offered by this sector is high.
In the fast food industry, the industry is moving towards saturation as it moves into the
mature life cycle stage. This is making it harder for new competition to find suitable
locations and build a significant sustainable market share. There has been an observable
increase in premium food offerings within the industry and from supermarkets. This trend
will increase competitors in the premium pizza market that RFG operates in.
Threat of Substitute Products
Risk: High
RFG trades in industries that see new entrants as well as new ideas. As such there are
threats of substitute products coming through constantly. We have seen a dynamic shift of
the consumer to healthier options and niche brands. This shifts the emphasis to companies
like RFG to ensure they are keeping up with consumer demand. Concern exists as to RFG’s
ability to show significant product nimbleness to deal with this risk. As mentioned previously
RFG has begun to allow individual franchises to experiment with product differentiation
which should help with the added benefit of meeting the demand of geographic locations
without the need for central oversight.
EFN415 – Queensland University of Technology Page 9
10. Threat of Bargaining Power of Buyers
Risk: Low
RFG is primarily a direct to consumer retailer and make the majority of their revenues from
their franchisees. The end consumer in the market place has plenty of choice and as such is
responsive to competitive forces in price, quality and product differentiation. RFG has
chosen to occupy a premium segment of their chosen industry segments which has allowed
them to receive higher margins but this will be impacted as competitors increase the quality
of competing offerings or lower their prices.
COMPANY ANALYSIS
Company Profile
RFG is the owner, developer and manager of the Donut King, Brumby’s Bakery, Michel’s
Patisserie, bb’s Café, Esquires, Gloria Jean’s Coffees, It’s A Grind, The Coffee Guy, Café2U,
Pizza Capers Gourmet Kitchen and Crust Gourmet Pizza Bar franchise systems. Its major
franchises are household Australian names.
In addition, the company is a significant wholesale coffee roaster supplying existing brand
systems and third party accounts under the Evolution Coffee Roasters Group, Roasting
Australia and Di Bella Coffee brands.
The Group’s main operations are in within the Australian market (69% of the network),
however they do have a market presence in Europe (8%), America (4%), Asia (8%) and parts
of the Middle East (5%)
EFN415 – Queensland University of Technology Page 10
Figure 8
11. Five of the major franchises that RFG owns and operates are;
Besides doughnuts, Donut King also serves a variety of other food
items and beverages such as coffee and teas, soft drinks,
milkshakes, soft serve ice creams, frozen carbonated beverages,
and hot dogs
Brumby's bakeries sell a range of sweet and savoury food. Various
flavours of pies and sausage rolls, loaves of bread, cheese and
bacon buns and rolls, cream buns and rolls, and small cakes and
pastries are the types of products sold.
Michel's Patisserie is a chain of bakery-style food outlets selling
cakes, pies, savouries, and espresso coffee
In addition to pizza, Pizza Capers also serves a wide variety of
other food items, as well as beverages and desserts such as:
chicken wings, pasta, calzones, garlic bread, salads, soft drinks, ice
creams and gelato
Gloria Jean's Coffees is a franchised specialty coffeehouse
company that has opened more than 1,000 coffee houses across
39 markets worldwide, including over 460 in Australia. In 2014
Gloria Jeans was purchased by the Retail Food Group for $163.5
million, RFG’s largest acquisition to date
EFN415 – Queensland University of Technology Page 11
12. Key Executives
Retail Food Group is run by a strong group of executives, all of which have proven
experience in the food industry, and critically in the franchise systems.
Name Position
Colin Archer Independent Chairman
Anthony (Tony) Alford Non-Executive Chairman
Andre Nell Managing Director
Gary Alford CEO
Peter McGettigan CFO
Mike Gilbert Chief Franchise Officer
Damian Tarry Director of Human Resources
COMPANY STRATEGY
Competitive Strategy
RFG's upper hand lies in its franchisee model, existing store footprint and the quality of its
products. Moreover, because of the large business establishment, it is additionally feasible
for the company to adventure economies of scale. Product marketing research and
innovation, along with IT support are done at corporate level, which gives a relief to the
franchise owners. These economies of scale would not be achievable at smaller levels of
operations, which many cafes and bakeries are. As premium quality adequately shields RFG
from value rivalry, generally stable level of working costs permits the group to increase a
higher operating edge than its competitors.
Recent Highlights
Without a doubt, the highlight for Retail Food Group in the past few years has been its
acquisition of the Gloria Jeans Coffee brand. The 2015 annual report stated that the
purchase of Gloria Jean's increased RFG’s store count by 358 domestically and 420 around
the world, making Retail Food Group the "clear leader in retail food franchises specialising in
coffee". As part of this acquisition, the company elected to write down the value of sub-
scale and underperforming brands in 2015 such as BB's Cafe and Esquires Coffee by $18.5
million, denting bottom-line profits. BB's Cafe and Esquires stores were converted to Gloria
Jean's stores or Michelle's
Business Strategy
EFN415 – Queensland University of Technology Page 12
13. The group is proceeding to divest non-core business by the transition from a wholesale
bakery supply to Michel’s Patisserie franchisees to a more traditional royalty-based system.
While this reduced significant amounts of revenue generated from wholesale (over $20
million per annum), operating costs declined at higher rate and led to higher NPAT margin.
RFG has continued on its aggressive acquisition strategy and has recently acquired
Melbourne-based food business Hudson Pacific. The group explicitly expresses its intention
to acquire further brands to expand its franchise system and expand them into the global
market. This global expansion will allow them to tap into faster growth world markets.
Delivering on this strategy, RFG announced that during 2016, 57% of all new outlets opened
were outside of Australia.
SWOT Analysis
Strengths
By employing a franchise system, RFG has low capital investment and enjoys a healthy
percentage of revenue, which is generated by royalties from thousands of individual
franchise owners. Because RFG produces and supplies its own brand of coffee to all stores, it
ensures that a major cash outlay is kept within the business, and not put into the hands of
rivals. RFG is not afraid of altering the markets perception of the brand, it is willing to take
short term setbacks to allow the long term future of the brand to flourish, as shown by the
rebranding of stores in 2015. The group likes to hold a substantial amount of cash reserves
in order to allow the acquisition of any brands that threaten to remove market share from
RFG. At the conclusion of FY2016, the group held $17.4m in cash reserves.
Weaknesses
The RFG business owns many brands, however the popularity of these brands is a
shortcoming. Compared to brands such as Starbucks, Domino’s Pizza or Subway, there is a
large difference in brand awareness of those firms compared to the brands that RFG holds.
Whilst going forward, the group aims to be more cutting edge and develop market leading
franchises, in the past the lack of marketing initiatives and inability to acquire these
competitors at an early stage of growth may prove a hard to overcome obstacle.
EFN415 – Queensland University of Technology Page 13
14. Opportunities
With the acquisition of the Gloria Jeans Brand, RFG gained immediate international
exposure that it previously lacked. The past financial year has seen the commissioning of
three international coffee roasting facilities and distribution hubs to complement existing
facilities in Australia, New Zealand and North America. The group’s Los Angeles roasting
facility has been re-badged as Di Bella Coffee. Management has stated that the North
American market is a priority, and as such the business has appointed a sales and
distribution team. This team will develop coffee blends more suitable to the American taste.
The ability for the firm to penetrate into these international markets will be a key factor in
medium to long term growth for RFG. Just less than 17% of the group’s EBITDA was
generated internationally during the latest half-year. The firm’s executives expect that
measure to grow over the coming years and is demonstrated by 57% of all new openings
being located outside of Australia.
Threats
The growth of mobile technology and the ability for “on the go” ordering is something that
RFG will need to look to implement. In Australia, Domino’s Pizza has gained a stranglehold
on the Pizza industry due to its investment in ordering technology. If RFG ignore this area of
development, there is a chance the brand becomes stagnant and competitors gain an
advantage. As shown by the Porter Five Factor analysis, RFG operates in industries that
produces high risk in four out of five factors.
EFN415 – Queensland University of Technology Page 14
15. VALUATION
The valuation method used to give an intrinsic value of the company is a discounted cash
flow (DCF) model. While the most recent annual report is unavailable at the time of writing,
figures were released in a full year results presentation during which the FY2016 financial
statements were released. At this time, the acquisition of Hudson Pacific Corporation was
announced. These figures have been used as part of our valuation.
Capital Structure
As stated in the 2015 annual report, the target gearing ratio for the firm is between 40-60%
as the proportion of net debt to equity. The firm has a stated goal of growth through
acquisition with the purchase of Hudson Pacific expected to raise the D/E ratio to 55%.
Whilst this is not used in our valuation, we believe this is an important item of note for
investors.
Effective Tax Rate
The average effective tax rate paid by RFG over the previous three years was 26.85%. As the
nominal tax rate on enterprises in Australia is set at 30% we have used this for our model.
This rate is currently a topic of political discussion and we have factored this into our model
by lowering the tax rate to 28.50% for FY2019.
Cost of Equity
Cost of equity for RFG was calculated using the dividend growth model as opposed to the
CAPM due to the widely varying expected rates of returns on the ASX. The firm has
announced its upcoming dividend. This resulted in a cost of equity of 16.68%. We have used
this figure in our WACC calculation.
Cost of Debt
The overwhelming majority of the firm’s debt is from bank loans, and according to the latest
annual report, the weighted average effective interest rate is 4.3%. This will be used as the
cost of debt.
WACC Calculation
Using the figures outlined above for cost of equity, cost of debt and effective tax rate as well
as using the levels of total debt and equity as outlined in the latest annual report of
$276.3m (total liabilities) and $680m (total assets), the WACC figure for RFG is 12.81%
EFN415 – Queensland University of Technology Page 15
16. Net Borrowings
We have forecast net borrowings to increase by $50m reflecting the additional borrows that
are needed to fund the Hudson Pacific acquisition. This can be seen in the balance sheet
under total debt. We made an adjustment from the total $55m to account for timing
differences. FY2018 and FY2019 both forecast an additional $5m in borrowings to account
for the timing lapse and other expenses, such as plant or other capital requirements that
may arise from the Hudson acquisition.
Interest Expense
Interest expense has trended upwards as a result of the increase in borrowings (due to
acquisitions). For FY2017 we are predicting interest expense to rise in line with the
proposed additional borrowings. Interest futures as predicted by the ASX are showing a high
probability that the official cash rate will be lowered in the coming years, but are not pricing
in a full cut. If a rate cut occurs, it can be expected to be passed on to some extent. We have
tested the model with a rate cut of 0.25%, and the impact on share valuation is minimal. As
such we are not predicting any changes in cost of debt or market risk premium. The interest
expenses will rise in line with changes in net borrowings.
Plowback Ratio
Plowback ratio has been on average 76.55% over the last five years, and for our forecast we
have simplified this to 75%.
Changes in Working Capital
Assets
Based on the firm’s plowback ratio of 75%, we are expecting assets to rise in line
with this reinvestment policy.
Cash
Cash on hand increased following the Gloria Jeans acquisition, and as such we have
forecasted a similar increase to occur in FY2017 post Hudson acquisition. We do
forecast a year on year increase however due to the nature of the Hudson
acquisition and the business model going forward.
EFN415 – Queensland University of Technology Page 16
17. Current Liabilities
Similarly, for liabilities post Gloria Jeans acquisition we saw an increase in liabilities.
This reflects increase in trade, other payables and provisions. In line with this we
predict a 12% rise in liabilities for FY2017. In addition to this the firm has taken on
additional debt with the purchase of Hudson Pacific which has also been accounted
for. In FY2018 and FY2019 total liabilities will rise in line with net borrowings and our
forecasted increase in capital requirements.
Operating Activities
Revenue
We forecasted revenue predictions based on the values given by RFG during the
Hudson acquisition presentation. We have reason to believe these figures as RFG
have a demonstrated the ability to integrate and deliver on forecasted acquisition
revenue. In FY2018 we have forecasted a conservative 10% increase in revenue to
allow for the impact of a full year revenue receipt from the Hudson acquisition.
Included in this, we have allowed for growth as predicted in industry trends and that
has been observed within the existing business. FY2019 revenue growth slows down
reflecting the full year integration of Hudson, as well the realisation of the stated
acquisition benefits. These assumptions are higher than the forecasted economic
growth and inflation rates but are in line with forecasted industry growth rates.
Operating Expenses
As RFG takes control of Hudson, we forecasted a 68% increase in operating expenses
for FY2017. This increase is due to the large amount of additional capital now owned
by RFG and the hefty initial outlays that can be expected. During the Hudson
presentation RFG advised a combined targeted NPAT for FY2017. We have used this
figure to guide our prediction for the operating expense of the firm during FY2017.
The following year, FY2018, we have forecasted an increase of 12%. This figure is
again due to full year impacts, integration and restructuring costs. FY2019 sees an
expense growth of 2.5%. We forecasted this figure based on expected costs relating
to restructuring, positive impacts from vertical integrating supply lines, negated by
rising costs as per our inflation outlook.
EFN415 – Queensland University of Technology Page 17
18. Depreciation and Amortization
We have modelled the rate of depreciation for FY2017 to increase due to the
Hudson acquisition. As we have mentioned this acquisition will bring assets of plant,
property and equipment which we expect to have a large depreciation expense.
We’ve used the increase following the acquisition of Gloria Jeans as a baseline for
this assumption. We assume that once RFG are able to rework production scales, the
higher rate will reduce to a more constant 30% year on year increase. We believe
this reflects the more capital intensive structure of Hudson Pacific.
Terminal Value of the Firm
To arrive at the terminal value of the firm we estimated an internal growth rate based on
the plowback assumption of 75%. The ROE average of the firm has been 22%, but due to the
managements long term growth forecast of 2.5%, we forecasted a ROE of 15.2% going
forward into the future. These assumptions give the perpetuity growth rate of 3.80%. This
is above our long term growth forecast GDP growth, and the company outlook from the
Porter Five Factor does not support this. We used the assumption of 3.60%, reflecting the
deployment of the brands into the global markets producing growth at the higher end our
outlook, but within estimates for world growth.
Buy, Sell or Hold Recommendation
Using the discounted cash flow model we estimate the value of the company at
approximately $6.50. As at close of market 12 September the price was $6.55 or 1.8%
higher than our valuation. We have calculated our range based on the potential change in
terminal growth rates, using an Australian growth rate of 3.3% and a world growth rate of
3.8% as ranges. This gives an indicative price range of $6.30 - $6.60. As closing price is within
this range, we recommend to hold this share as it is currently priced adequately for its
estimated valuation.
EFN415 – Queensland University of Technology Page 18
19. Appendix
Appendix 1 – Valuation Model
($M) CAGR
2014 2015 2016 (14-16) 2017 2018 2019 Proposed Borrowings ($M) 50,000 276,300
Revenue 128,000 210,400 274,600 28.97% 411,900 453,090 475,745 Risk Free 1.86% 680,000
% growth 64.38% 30.51% -31.15% 10.00% 5.00% Cost of Debt 4.30%
Marginal Tax Rate 30.00%
Operating Expense 68,900 151,900 170,900 35.37% 287,112 321,565 329,605 Plowback ratio 75.00%
% growth 120.46% 12.51% -67.78% 12.00% 2.50%
Dep./Amort. 1,568- 3,707- 6,584- 61.33% 10,622- 13,809- 17,951-
% sales -1.23% -1.76% -2.40% 25.09% -2.58% -3.05% -3.77%
EBITDA 59,100 58,500 103,700 20.61% 124,788 131,525 146,140
% margin 46.17% 27.80% 37.76% -6.48% 30.30% 29.03% 30.72% Items CAGR 2017 2018 2019 Avg YOY Growth
Revenue 28.97% 50.00% 10.00% 5.00% 21.67%
Add Back Dep./Amort. 1,568- 3,707- 6,584- 10,622- 13,809- 17,951- Operating Expense 35.37% 68.00% 12.00% 2.50% 27.50%
Dep./Amort. 61.33% 61.33% 30.00% 30.00% 40.44%
EBIT 57,532 54,793 97,116 19.07% 114,166 117,716 128,189
% margin 44.95% 26.04% 35.37% -7.68% 27.72% 25.98% 26.94%
Interest Expense 4,728- 7,076- 9,195- 24.82% 11,345- 11,560- 11,775- Interest Expense 24.82% 0.00% 0.00% 0.00% 0.00%
% growth Tax -26.85% 30.00% 30.00% 28.50% 29.50%
Net Income 24.26% 24.26% 24.26% 24.26% 24.26%
EBT 52,804 47,717 87,921 18.52% 102,821 106,156 116,414
41.25% 22.68% 32.02%
Items CAGR 2017 2018 2019 Avg YOY Growth
Tax 15,890- 14,165- 26,287- 18.27% 30,846- 31,847- 33,178- Current Assets 20.82% 7.00% 7.00% 7.00% 7.00%
Calculated Tax Rate -27.62% -25.85% -27.07% -26.85% Cash and Cash Equi. 14.62% 14.62% 1.50% 1.50% 5.87%
Current Liabilities 37.54% 12.00% 2.50% 2.50% 5.67%
Total Debt 50,000 5,000 5,000
Net Income 36,914 40,628 70,829 24.26% 71,975 85,869 95,011
% margin 28.84% 19.31% 25.79% -3.65% 17.47% 18.95% 19.97%
% growth -33.04% 33.58% 0.81% -32.25% 8.46% 5.38%
Change in NWC 38,468- 46,670 86,982 11,372 12,231
Free Cash Flow 5,867 124,083 180,924 111,050 125,193
WACC 12.810%
Discount Period 1.0 2.0 3.0
Discount Factor 0.8864 0.7858 0.6966
PV of Free Cash Flow 160,379 87,262 87,204
($M) CAGR
2014 2015 2016 (14-16) 2017 2018 2019
Current Assets 50,659 90,182 89,346 20.82% 182,270 195,029 208,681
Cash and Cash Equi. (Included) 11,559 17,149 17,406 14.62% 19,951 20,250 20,554
Liabilities
Current Liabilities 19,034 97,025 49,519 37.54% 55,461 56,848 58,269
Net Borrowings 68,949 156,169 206,607 50,000 5,000 5,000
Net Working Capital
31,625 6,843- 39,827 7.99% 126,809 138,181 150,412
Terminal Value
Terminal Year Free Cash Flow 125,193
Perpetuity Growth Rate 3.60%
Terminal Year EBITDA 146,140
Terminal Value 1,408,249
Implied Exit Multiple 10.23
Discount Period 4
Discount Factor 0.6558
Present Value of Terminal Value 923,555
% of Enterprise Value 1
Enterprise value
Present value of Free Cash Flow 334,845
Terminal Value 1,408,249
Discount Factor 0.6558
Present Value of Terminal Value 1,258,400
% of Enterprise Value 100.00%
Enterprise value 1,258,400
Less: Total debt 206,772-
Plus: Cash and Cash Equi. 17,406
Net Debt 189,366
Implied Equity Value 1,069,034
Number of shares on issue (M) 164968
Implied share price 6.48$
Balance Sheet
Balance Sheet
Historical Forecast
Equity ($M)
Growth Model
Cash Flow
Historical Forecast Inputs (For 2017) Inputs (At EOFY 16)
Debt ($M)
EFN415 – Queensland University of Technology Page 19
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ABS. (2016). Retrieved from ABS: http://www.abs.gov.au/
ASX. (2016). Retrieved from ASX: http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf
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http://data.worldbank.org/indicator/SL.UEM.TOTL.NE.ZS
Dominos. (2016). Annual Report. Dominos. Retrieved from http://dominosinvestors.com.au/reports-
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IBISWorld. (2016). Australian Industry Report. IBISWorld.
IMF. (2016). World Economic Outlook Update, International Monetary Fund, January . IMF.
Melbourne, U. o. (2016, July). Retrieved from University of Melbourne:
https://melbourneinstitute.com/miaesr/publications/indicators/csi.html
OECD. (2013). OECD Economic Outlook volume 2013/1, Growth Prospects and Fiscal Requirements
over the long term. OECD. Retrieved from OECD:
https://www.oecd.org/eco/growth/Growth-prospects-and-fiscal-requirements-over-the-
long-term.pdf
Reserve Bank of Australia. (2016). Retrieved from Reserve Bank of Australia:
http://www.rba.gov.au/statistics/
Retail Food Group . (2015). Annual Report 2015. RFG.
Retail Food Group. (2012). Annual Report 2012. RFG.
Retail Food Group. (2013). Annual Report 2013. RFG.
Retail Food Group. (2014). Annual Report 2014. RFG.
Retail Food Group. (2016). FY2016 Presentation. Retrieved from RFG: https://www.rfg.com.au/
EFN415 – Queensland University of Technology Page 20