Recent rapid share-price appreciation at Crawshaw Group (LSE: CRAW) suggests the firm’s story has caught on with investors. The AIM-listed meat-based retail chain trades on a forward P/E rating of about 30 for year to January 2016 at today’s 59p or so, after delivering a 750% share-price gain since November 2013.
There’s excitement in the air about Crawshaw’s forward roll-out programme, but the share price seems well up with events to me, and I think better value can be found with Tasty (LSE: TAST), which is rolling out its successful restaurant chain. In contrast to Crawshaw, Tasty’s share price has eased off recently, though operational progress powers on.
Sausages with benefits
As we’d expect, the Crawshaw story is compelling. The firm currently runs 21 butcher shops around Yorkshire, Lincolnshire, Nottinghamshire and Derby offering pre-packed meat bargains alongside a traditional in-house butchery service. There’s also a slick line in hot and cold food to go, and two factories back the whole retail operation, which provide vertical integration for the supply chain.
The company handles all its own processing, warehousing, cold and frozen storage, cutting de-boning, packing and labelling, sausage and burger production, and runs a fleet of refrigerated trucks delivering to its own shops and commercial customers. Currently, around 65% of the firm’s sales are raw meat and about 35%, food to go.
Crawshaw’s ambitious expansion programme generates rumours that the company is aiming to add ten more outlets over the next year or so and around 20 more each year after that. To help realise the vision, Crawshaw just raised a gross £8.8m with two placings, shaving about 26% from existing shareholder’s stakes in the business.
If Crawshaw pulls off its expansion plans profitably, diluted investors may be glad of owning a smaller share of a larger business. However, the firm’s record on growth seems patchy:
|
Year to January |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Revenue (£m) |
18.95 |
19.06 |
18.89 |
18.78 |
21.02 |
|
Net cash from from operations (£m) |
0.59 |
1.14 |
0.39 |
0.42 |
1.37 |
Pizza, pasta and fun
An equally compelling story exists at Tasty. The firm currently runs 32 restaurant outlets mostly branded Wildwood, and of the themed pizza, pasta and good times variety mostly located in the south and east of England. I peeked at the Newmarket branch recently and, although closed, the restaurant looks very slick and inviting.
Tasty also just raised money in a placing but the amount was modest at a gross £2.5m. What’s more, Tasty doesn’t need to make a quantum leap in its rollout programme; the bus has been motoring on for some time. Last year, Tasty opened five new restaurants and, unlike Crawshaw, progress shows in a consistent improvement in financial performance without much zigzagging:
|
Year to December |
2009 |
2010 |
2011 |
2012 |
2013 |
|
Revenue (£m) |
9.19 |
10.56 |
14.56 |
19.32 |
23.19 |
|
Net cash from operations (£m) |
0.36 |
1.22 |
1.74 |
2.4 |
3.24 |
Pick a rollout
The opportunity at Crawshaw feels like a wilder bet than that at Tasty. Crawshaw has everything to prove and has a relatively short record of trading improvement upon which to build. Is a massive expansion programme wise under such circumstances?
Tasty’s stellar record of growth and expansion at a rate of five or so restaurants a year, which could accelerate, is not to be sniffed at.
It’s an interesting comparison. Crawshaw’s market capitalisation is around £47m and Tasty’s about £54m, so they are similarly sized. However, the clincher for me is Tasty’s forward valuation as it trades on a P/E rating of around 16 for 2015, just about half the valuation of Crawshaw.
I’ve owned Tasty shares for some time, but the shares look like good value just now. Recent share-price weakness could be providing an opportunity to enter a well-established rollout programme.
What now?
As well as Tasty, many other decent small-cap companies have seen their share prices dragged down with the general market recently.
