In a discussion of the restaurant industry, the following catches the eye:
from www.seekingalpha.com – In this challenging environment, we find one company, Rick’s Cabaret International (RICK) as an interesting prospect. Rick’s is an operator of “adult” nightclubs and bars. From Reuters:
Rick’s Cabaret International, Inc. incorporated in 1994, owns and/or operates a total of 19 adult nightclubs that offers live adult entertainment, restaurant and bar operations. Nine of its clubs operate under the name Rick’s Cabaret; four operate under the name Club Onyx, upscale venues that welcome all customers but cater especially to urban professionals, businessmen and professional athletes; four operate under the name XTC Cabaret; one club that operates as Encounters; and one club that operates as Tootsie’s. The Company’s nightclubs are in Houston, Austin, San Antonio, Dallas and Fort Worth, Texas; Charlotte, North Carolina; Minneapolis, Minnesota; New York, New York; Miami Gardens, Florida; Philadelphia, Pennsylvania and Las Vegas, Nevada. The Company owns and operates adult entertainment Internet Websites. The Company’s online entertainment sites include CouplesTouch.com, NaughtyBids.com and xxxpassword.com. In April 2008, the Company acquired a media division, including the trade magazine serving the multi-billion dollar adult nightclubs industry. As part of the transaction the Company also acquired two industry trade shows, two other industry trade publications and more than 25 industry Websites.
What makes Rick’s a standout in this industry? For one thing, it is profitable. Sex sells. Rick’s has a current P/E of 12.4 vs a three year average of 23.5x. Other valuation ratios are similarly depressed. Price to Book is now 0.96 vs 2.54 and Price to Sales is 0.98 vs a three year average of 2.15. The company’s gross margin is a strong 65.9 percent for the training twelve months (TTM) vs 65.3 for FY2008. TTM operating margins are down to -2.0 as compared to 22.9 percent in 2008 but net margins are about 7.6 percent.
Debt is not an overwhelming problem for Rick’s. Total liabilities to total assets are 45 percent; long term debt to capital is 30.2 percent and long term debt to equity is 43.4 percent. sales growth is strong at 45 percent y-o-y and continuing strength in gross profit which grew 19.8 percent y-o-y. There is weakness in net income which declined .8.5 percent y-o-y.
At current prices, RICK is trading at 12.22X FY09 consensus of $0.64, 8.19X FY10 consensus of $0.955 and 5.47X FY11 consensus of $1.43. The June 2009 quarter actual of $0.20 beat the Street consensus of $0.19 and the March 09 actuals of $0.16 beat the consensus of $0.11.