IPO Analysis: Tim Horton's (THI, WEN)

by: ClearFish Research

Story: Tim Horton's is a Canadian and US coffee shop being spun out from Wendy's (WEN). Food industry IPO's over the last year (CMG, CBOU, KONA, MRT, RUTH) have not done too well:

The headline you will see everywhere else is probably the opposite, since it will be based on the recent impression left by Chipotle (NYSE:CMG), and based on comparing the list price to the recent price. Even then, most were flops, and using our standard IPO methodology, all but 1 were flops. We were unimpressed with Caribou Coffee, but we think each of these plays is better examined individually. For example, CMG serves an Americanized Mexican food palette, which has relatively less competition than the coffeehouse sector. A McDonald's spin out is also obviously a differentiating factor, although Wendy's Stock has done better recently.

Tim Horton's is part of a trifecta of burger flip IPO's - first was CMG spun out of McDonald's, now comes this one, and announced and expected is Burger King. Why all the sudden burger action? We don't know, and we don't really care. It would be nice to get another Starbucks, but the odds are very very slim. So we don't really care, but we'll take a quick look.

Company: Their prospectus shows operating income about flat over the last 3 years ($280M, $320M, $290M), with some fluctuation. They run about 6% sales growth (flutters up and down depending on year and country and exact type of store). We're bored. Blah.

Stock: Wendy's (NYSE:WEN), The parent of Tim Hortons, has made a little run in anticipation of the spin out, but had been doing ok even without it. WEN might be the play rather than THI, but we will probably pass.