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| Date: Friday 29th 2008f August 2008 09:11:20 PM |
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EPS Estimation for KKD |
| This is the heart of our analysis. All we try to do is to predict the company's profit for the coming fiscal year. I spent most of the analysis predicting revenue because without it, there will be no profit! Therefore, predicting revenue is essential for other components of the income statement. |
| Revenue Estimation |
| For the 9 months ending Oct 04, KKD reports revenue of $ 532 M. For fiscal year ending Jan'05, I believe revenue can reach $ 715 M. For fiscal year '06, I believe revenue will increase 10% if the company just focuses on improving existing stores. This means that revenue for fiscal year '06 is $ 786 M. |
| Gross Profit Estimation |
|
The high-carb
industry like doughnuts has its share of problems. Popular low-carb diet
has somehow shaped the way people eat their meals. However, I do believe
that the trend will fade and people will eat what they think is tasty,
including doughnuts! I believe gross profit margin will move to 23%
range. Over the last few years, KKD has a gross profit margin in the
range of between 20-24%.
With estimated sales of $ 786 M, gross profit for fiscal year '06 is $ 181 M. |
| SG&A Estimation |
| We predict SG&A Cost to be $ 80 M consisting of $30 M for depreciation and amortization and $50 M for other components of SG&A.. For fiscal year '05, the figure is around $ 80 M as well. I believe management can achieve this number if they focus on improving existing stores and watch their expense, especially since depreciation expense for new store opening will level out. |
| Interest & Income tax expense |
| Long term Debt stood at $133.6 M for KKD. Assuming an interest rate of 8 % per annum, interest expense is $ 11 M. KKD paid around 35% of income tax for their latest fiscal year. Based on this, income tax is estimated to be $ 30 M. |
| Shares Outstanding Estimation |
| KKD currently has no stock buy back program. I think that the number of shares outstanding will rise slightly to 62 M shares by next year. |
| Pro Forma Income Statement for KKD (fiscal year ended on January '06) | |
| Revenue | $ 786 M |
| Cost of Goods Sold | $ 605 M |
| Gross Profit | $ 181 M |
| SG & A | $ 80 M |
| Interest Expense | $ 11 M |
| Profit Before Tax | $ 90 M |
| Income Tax Expense | $ 31 M |
| Net Income | $ 59 M |
| Shares Outstanding | 62 M shares |
| EPS Estimate |
$0.95 |
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