Opinions
James Telfser
The Second Cup Ltd
SCU-T
SELL
Aug 27, 2013
Stock price when the opinion was issued
You might be interested:
Same-store sales are falling, which is not a good thing in retail. They are adding stores to pay the capital up front and this is expensive. So they are growing that way but each store pays less revenue. Doesn’t know how you fix that. Dividend looks like it is well covered, right now but a slight change in revenues for company like this can lead to a much bigger change in profits. 8.6% dividend.
It is hard to follow this story as there isn’t any analyst coverage on it. Doesn’t look like things are going well. There is a bit of a coffee war going on between McDonalds, Starbucks and Tim Horton’s. Today’s move by the federal government, restricting foreign workers, could hurt the coffee people in particular. If you own, he would look to trying to get yourself out of it.
A company like this could come down towards the end of the year when there is tax loss selling. When they eliminated the dividend, he put it on his watch list. When he discovers a company, he does not buy into it for at least 6 months. When you see a takeover in the field, for example Tim Horton’s (THI-T) sometimes that means other takeovers in the field might follow. This one has started to mount his interests.
Not on his radar screen. Stock has been incredibly beaten up. Having a problem with their brand. Second Cup is not one of the natural brands that you think of in Canada. Have a lot of competition. Lots of headwinds. Yield is 9%. Paying out more in its dividend than it makes in earnings. If you own, he would suggest moving to another sector.