Summary
- A leading Brazilian steakhouse, or churrascaria, which has specialized for over 35 years in fire-roasting high-quality meats utilizing the centuries-old Southern Brazilian cooking technique of churrasco.
- 37 restaurants in the US, Mexico & Brazil. Growth plan to 100.
- Q1 rev +6% to $65mm. Q1 profits +69%. P/E ratio 18.3.
- '14 World Club resulted in high sales.
Based in Dallas, TX, Fogo de Chão (Pending:FOGO) scheduled a $75 million IPO on Nasdaq with a market capitalization of $463 million at a price range midpoint of $17 for Thursday, June 18, 2015.
Manager, Joint-managers: Jefferies, J.P. Morgan
Co-managers: Credit Suisse, Deutsche Bank Securities, Piper Jaffray, Wells Fargo Securities, Macquarie Capital
Co-managers: Credit Suisse, Deutsche Bank Securities, Piper Jaffray, Wells Fargo Securities, Macquarie Capital
End of lockup (180 days): Tuesday, December 15, 2015
End of 25-day quiet period: Monday, July 13, 2015
End of 25-day quiet period: Monday, July 13, 2015
Summary
FOGO is a leading Brazilian steakhouse, or churrascaria, which has specialized for over 35 years in fire-roasting high-quality meats utilizing the centuries-old Southern Brazilian cooking technique of churrasco.
FOGO is a leading Brazilian steakhouse, or churrascaria, which has specialized for over 35 years in fire-roasting high-quality meats utilizing the centuries-old Southern Brazilian cooking technique of churrasco.
FOGO believd it is in the early stages of our growth with 37 current restaurants, 26 in the United States, 10 in Brazil and one in Mexico, the first joint venture restaurant. Based on internal analysis and a study prepared by Buxton, FOGO believes there exists long-term potential for over 100 new domestic sites and additional new restaurants internationally
Valuation
Glossary
Glossary
Accumulated deficit ($mm)
|
.
|
.
|
-$42
| |||
Per share dilution
|
.
|
.
|
-$20.85
| |||
Valuation Ratios
|
Mrkt Cap ($mm)
|
Price /Sls
|
Price /Erngs
|
Price /BkVlue
|
Price /TanBV
|
% offered in IPO
|
Fogo de Chão
|
$462
|
1.8
|
18.3
|
2.3
|
-4.4
|
16%
|
annualizing Q1 '15 proforma
| ||||||
Conclusion
Buy
Buy
37 restaurants in the US, Mexico & Brazil
Growth plan to 100
Q1 rev +6% to $65mm
Q1 profits +69%
P/E ratio 18.3
Price to book 2.3,Price to tangible book -4-4
'14 World Club resulted in high sales
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.
FOGO is a leading Brazilian steakhouse, or churrascaria, which has specialized for over 35 years in fire-roasting high-quality meats utilizing the centuries-old Southern Brazilian cooking technique of churrasco..
Growth plan
FOGO believed it is in the early stages of our growth with 37 current restaurants, 26 in the United States, 10 in Brazil and one in Mexico, the first joint venture restaurant. Based on internal analysis and a study prepared by Buxton, FOGO believes there exists long-term potential for over 100 new domestic sites and additional new restaurants internationally
2014 FIFA World Cup and Recent Events in Brazil
The 2014 World Cup (the "World Cup") took place in Brazil from June 12 to July 13, 2014. The event positively impacted operating results for Fiscal 2014 because FOGO's Brazil restaurants are located in cities that hosted World Cup matches.
Of the 64 World Cup matches, 32 were hosted in cities where FOGO operates. We estimate that the World Cup positively impacted revenue by approximately $5.0 million for Fiscal 2014. Comparable restaurant sales for our Brazil restaurants grew approximately 11.4% for Fiscal 2014.
Adjusting comparable restaurant sales to exclude the impact of the World Cup FODO estimates that comparable restaurant sales for Brazil restaurants grew approximately 1.7% for Fiscal 2014.
As a result of the impact the World Cup had on 2014 results in Brazil, FOGO expects comparable restaurant sales in Brazil to be lower in the second and the third quarter of 2015 as compared to the same quarters of 2014.
Additionally, in March and April of 2015, a series of protests began in Brazil against the current government and President. The initial protests occurred in cities throughout Brazil, including in Rio de Janeiro and Sao Paolo, on March 15, with protesters generally reported to number around a million, and continued throughout the remainder of March and into April.
As a result of the protests, restaurants in Brazil experienced reduced guest traffic in the second half of March and in April. Protests currently continue throughout Brazil and FOGO anticipates that results of operations in the second quarter of Fiscal 2015 could be impacted by the ongoing political activity.
Restaurant Development
Over the next five years FOGO plans to increase company-owned restaurant count by at least 10% annually, with North America being our primary market for new restaurant development. In addition, over the next five years, FOGO plans to open three to five new restaurants in Brazil.
Intellectual property
FOGO's principal trademarks include FOGO, FOGO DE CHÃO, BAR FOGO, and its campfire design, which FOGO has registered with the United States Patent and Trademark Office. FOGO has also registered or applied for registration of the FOGO EXPRESS, FOGO GRILL, BAR FOGO, FOGO TO GO, THE GAUCHO WAY OF PREPARING MEAT, and various designs as trademarks in the United States. In addition, FOGO has registered or applied for FOGO DE CHÃO, FOGO'S, various FOGO and FOGO DE CHÃO-formative terms, its campfire design, and other terms as trademarks in Brazil. Several of FOGO's principal marks are also registered or applied-for in numerous foreign countries.
FOGO's principal trademarks include FOGO, FOGO DE CHÃO, BAR FOGO, and its campfire design, which FOGO has registered with the United States Patent and Trademark Office. FOGO has also registered or applied for registration of the FOGO EXPRESS, FOGO GRILL, BAR FOGO, FOGO TO GO, THE GAUCHO WAY OF PREPARING MEAT, and various designs as trademarks in the United States. In addition, FOGO has registered or applied for FOGO DE CHÃO, FOGO'S, various FOGO and FOGO DE CHÃO-formative terms, its campfire design, and other terms as trademarks in Brazil. Several of FOGO's principal marks are also registered or applied-for in numerous foreign countries.
Competition
FOGO's restaurants compete with a number of restaurants within their markets, both locally owned restaurants and other restaurants that are members of regional or national chains based on the quality and variety of its menu offering, its service model and its authentic Brazilian cuisine.
FOGO's restaurants compete with a number of restaurants within their markets, both locally owned restaurants and other restaurants that are members of regional or national chains based on the quality and variety of its menu offering, its service model and its authentic Brazilian cuisine.
FOGO's competition continues to intensify as competitors increase the breadth and depth of their product offerings and open new restaurants. FOGO competes in the full-service dining category with other Brazilian-style steakhouses and local and national upscale steakhouses such as Ruth's Chris, Del Frisco's and the Capital Grille.
5% shareholders pre-IPO
Todd M. Abbrecht 91.66%
Todd M. Abbrecht 91.66%
Douglas A. Haber 91.66%
Jeff T. Swenson 91.66%
Funds affiliated with Thomas H. Lee Partners, L.P. 91.66%
Dividends
No dividends are planned.
No dividends are planned.
Use of proceeds
FOGO expects to receive $67 million from its IPO and use it for the following:
FOGO expects to receive $67 million from its IPO and use it for the following:
To repay the outstanding indebtedness under its Senior Credit Facilities and to pay fees and expenses related to its initial public offering and the refinancing of its Senior Credit Facilities.
Affiliates of certain of the underwriters are lenders under FOGO's First Lien Credit Facility and will be repaid with a portion of the proceeds of this offering.
Because affiliates of Credit Suisse Securities (NYSE:USA) LLC and Wells Fargo Securities, LLC are lenders under FOGO's First Lien Credit Facility and each will receive 5% or more of the net proceeds of this offering, Credit Suisse Securities LLC and Wells Fargo Securities, LLC are each deemed to have a "conflict of interest" under Rule 5121 of the Financial Industry Regulatory Authority, Inc., or FINRA.
Disclaimer: This FOGO IPO report is based on a reading and analysis of FOGO's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
