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Queries #Thread 16

#QSR #Stocks

Q- Can you look at Westlife Development(McDonald's) please?Also I hold Jubilant Foodworks from lower levels and it is at 1700 now, do you think it makes sense to sell it

1/n Comparison Chart I prepared for Westlife Development Vs Jubilant FoodWorks Vs Tasty Bite.  #Westlife #JubilantFoodworks #Tastybite
Listed QSR(Quick Service Restaurant), I chose -

Westlife Development (McDonald)

Jubilant Foodworks (Domino's Pizza & Dunkin Donut)

TastyBite - Supplier to Westlife (WDL) & Jubilant Food (JFW) & derives 33.2% revenue from QSR

Rest listed QSR, I didn't feel worth my time.

Westlife Development (WDL) - West & South India McDonald

Know Your Company (See Pic attached) –

Indian Promoter - Jatia Group

Google stories -> Amit Jatia
- Vikram Bakshi, Connaught Plaza Restaurants (CPRL) - North & East India McDonald, Dispute

Lets come Straight to Facts & Financials ! Listed on NSE.

WDL Absolute Return 10 yr - 9153% (WOW its Lottery)
Last 5Yr - 12.82% (Only ?)

So despite under-performing in last 5yr has yielded DREAM return in last 10 yrs. Unbelievable, Smells Fishy ? Not Yet, lets dig deeper-

WDL 10yr Sales Growth (100.74%) > Profit Growth (14.83%)
Last 5yr Profit Growth > Sales Growth

Frankly firms where Sales Growth > Profit growth over long period arouse suspicion in my head

ROE - Pathetic

Stock Price CAGR-> 10Yr DREAM Run despite Last 5Yr POOR performance

Digged WDL History to solve this Mystery.

Earlier named: Dhanaprayog Investments Co, used to offer investment and allied financial services, its license as a NBFC was cancelled in 2009
Locked up in in Upper Circuit almost non-stop from Jan 2009 to Jul 2013 - may be more..

It was ill-liquid stock(though not classified for some unknown reason), excluding the Bulk deals just few trades daily.

Moved from Rs 7.88 (21May2012) to Rs 286 on 3July2013.

Insider tradings & even promoters had to pay Regulatory charges(though minuscule) for settlement

Read July2013 article from moneylife -

Westlife Development: Low or no volumes and 2,20,000% price rise!…

That's enough for me.

Latest I saw was 14Feb2020 Insider trade (perhaps Valentine Day Gift exchange 😉)

So Stock Price performance till at-least 2013 seems like more of unjustifiable reasons.

See attached pic for the sudden spike in Stock Price of WDL (2,20,000% rise) which solves the MYSTERY behind it's 9153% return in 10 year despite POOR performance in last 5 years.

WDL -10 yr Revenue, Operating Expense, PBT, Tax & Net Profit Summary in pic.

Revenue-> Great
Operating Expense-> 46-50% Range for last 5-6 yrs
Profit Before Tax-> Erratic
Net Profit-> Erratic
Tax->10 yr almost Nil taxes paid

Financial Engineering? Creative Accounting?

Lets look at some Individual WDL Figures

Revenue Growth -ive until 2010. In 2012 exponential jump 28,288% & thereafter little rational

Net Profit Margin - Very Low

NetProfit Vs Revenue Graph -Revenue is
Increasing but NOT Profits
(Sign of Increasing Cost & Competition)

Interest Coverage Ratio (1.48) is dangerously Low & it has been in declining trend.

Debtplus = 0.43

Current ratio = 0.26 (Declining Trend)

Quick ratio = 0.22 (Declining Trend)

Both Current & Quick Ratio are well below comfort.

Seems like WDL has SOLVENCY Issue.

Income Vs OperatingCashFlow - Though OCF is Higher, but I see Huge Increasing Deviation between then (Not Good)
Income - Blue Line
OCF - Black Line

Fluctuating FreeCashFlow, Mostly -ive.
Seems WDL may be Struggling to Meet its Operational needs with the Cash it generates

EPS Growth (5Y) 112.34% (Great)

For Last 13 yrs-
Avg Net Profit Margin -0.10 % (Terrible)
Avg. ROE 0.38 % (Terrible & fluctuating)
FCF Growth Rate 0%
No Dividend.
Equity Dilution -2.75% (I don't like this usually Cash strapped companies do it)
ROCE, ROE, RoA are Terrible

Promoter Holding 59.12%
Reduced by -3.02% in Mar 2020 Quarter (Not Good)
P/E= 191.42 (Very High)
Debtor Days & Inventory Turnover Ratio has been steady (Good)

From all above -

Quality, Profitability & Solvency - Not OK
Growth, Efficiency, Financial Trend - Slightly OK

Lets Compare -

WDL Vs Jubilant Foodworks Vs Tasty Bite

10yr Cash Flow, EBITDA & Net Profit - WDL is miserable compared to JFW & Tasty Bite.

A nearly half Market Cap company(Tastybite) has way higher CFO, EBITDA & Net Profit

JFW (being a bigger player) has been great.

Since WDL has been erratic & irrational in the past for the reason mentioned (above in thread), it may be wise to compare last 5 yrs with JFW & Tasty Bite.

Stock Return Comparison - 5 Yrs (3Jun2020)

WDL -> 7.48% (Poor)
JFW -> 89.14% (Good)
TastyBite -> 134.39% (Best)

Revenue Growth
WDL ->Excellent & Increasing Trend
JFW ->Good
TastyBite ->Good

Profit After Tax
WDL ->Loss for 3 yrs than 2yrs+ive (Erratic)
JFW ->Good

Free Cash Flow
WDL-> -ive (Poor)
JFW-> -ive to +ive (Good but Fluctuating)
TastyBite-> Best & Increasing

Net Margin%

Operating Margin%
JFW ->Better

Cash Profit Margin%
JFW-> Good

Return on Assets (RoA)

Return on Equity (ROE)
JFW->Good but Fluctuating

Return on Capital Employed (ROCE)

Current Ratio
WDL->Danger (Poor)
JFW->Getting Better (OK)
TastyBite->Great (Best)

Quick Ratio

Interest Coverage Ratio
JFW->Ok (Just out of Woods)

P/E Valuation
WDL (Very High) > TastyBite > JFW

P/BV Valuation
JFW > TastyBite> WDL

EV/EBITDA Valuation
WDL > TastyBite > JFW

Price to Sales
WDL > TastyBite > JFW

Refer Comparison Chart I prepared for Westlife Development Vs Jubilant FoodWorks Vs Tasty Bite.
It gives an essence in nutshell.
WDL has lot of Red(Danger) signals as of now

My One line Conclusion-
Indian(Tasty) Food😋as of now beating American Burger & Italian Pizza.

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