Seeking Alpha

Hedge Fund Live's  Instablog

Hedge Fund Live
Send Message
Jeremy Frommer, CEO of Hedge Fund LIVE Jeremy Frommer has 20 years of industry experience and is currently responsible for general management and leadership of the General Partner. Previously, Mr. Frommer was a Managing Director and Head of the Global Prime Services Group (“GPS”) at RBC... More
My company:
Hedge Fund LIVE
My blog:
Hedge Fund Live
  • Wendy’s – A bargain?  0 comments
    Mar 8, 2011 8:33 AM | about stocks: WEN
     HedgeFundLIVE.com — in 2008, Wendy’s merged with Triarc in a $2.28bn deal that was supposed to bring a lot synergies and cost reductions.  Now here we are with the Arby’s franchise dragging the stock lower.  Arby’s revenues have declined 17% since the incision and little to none synergies were enjoyed.  Both companies have separate headquarters and the cost reduction in SG&A has not happened.  WEN is lagging behind with the lowest margins in the industry and that is mainly due to the lack of performance in Arby’s.

    Recently Management has come upfront with their decision to sell or divest the Arby’s franchise.  That will most likely happen as management is pressured by shareholders who will greatly benefit from the divestiture.  The stock ran up 7% when management explicitly said it is pursuing buyers for Arby’s in their latest Conference Call.  When that happens, shareholders will receive income from the sale in the form of reduction in debt or a per/share payout.  In addition, WEN will be left with a profitable business line that will generate around $207mm in operating profits and thus, making its valuation very attractive.  Management predicts a 15-20% growth in EBITDA in next years, but even if we use a 5% growth and a 15% WACC, we end up with a company value at over $3bn, or $7.17/share.

    WEN is without a doubt a BUY now at 4.91 for the reasons described above.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Themes: Wendy's, Fundamentals, analysis Stocks: WEN
Back To Hedge Fund Live's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.