Burger Fuel dip seen as 'short term'

Last updated 05:00 21/11/2012

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Share in Burger Fuel Worldwide fell almost 9 per cent despite the firm reporting a 34 per cent improvement in first half earnings.

The shares fell to $1.12 yesterday after the franchisor and restaurant operator reported net earnings of $308,000 for the six months to September 30, up from $225,000 a year ago. That was off a 10 per cent improvement in total revenue to $5.4 million.

Burger Fuel's stock has delivered strong capital returns to investors recently, having gained 103 per cent in the past year.

The price reflects the fact it is seen as a growth stock, with a price earnings ratio of 92.9.

PE ratios indicate how much investors are willing to pay for a stock. By comparison, established franchisor Restaurant Brands NZ has a PE of 15.8.

Burger Fuel chief executive Josef Roberts was confident the share price fall was "extremely short term", and that it would recover as people came to understand its business model.

He said the firm's unorthodox move to target franchise sales in the Middle East would pay off for shareholders in the long term.

Sales from the Middle East region rose 141 per cent in the first half, compared to more modest revenue gains of 5.8 per cent and 6.1 per cent in New Zealand and Australia respectively.

"There is a huge amount of hunger for Western culture up here [in the Middle East] and that is what we have seen, a strong migration towards our brand," Roberts said.

New Zealand remains the firm's biggest market, generating total revenues of $3.9m, versus $1.5m from overseas earnings.

He said Australia - where it has one restaurant and no franchises - remains full of potential, but the firm is limited to expanding in one international territory at a time.

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- BusinessDay.co.nz

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