pstas (premium)
April 13th, 2020 at 12:29 pm | (Unlocked) | Permalink |
CAKE- went to the local store for an order pickup Saturday evening and saw they were doing quite a business in c/o both walk in and curbside p/u. Per company press release:
The Company has seen off-premise sales recently accelerate approximately 85% since the fiscal fourth quarter 2019 level. On an annualized basis, current off-premise sales would equate to over $3 million per unit, on average. The restaurants are operating sustainably at present under this model. Currently, 30 locations across the Company’s concepts, including three The Cheesecake Factory restaurants, are temporarily closed.
On the downside, they have announced suspension of April rent payments but I see no indication on dividends. I am assuming suspended for now.
Store locations criteria is on income demographics so well place for a recovery. Still however, much uncertainty re: the continuing virus impact so considering small, conservative play.
Buy stock around $19; sell 21 Jan $20 covered call for approx. $5 nets a 44% return if called away @ 20. Any divvy would be a bonus. If stock went lower, would consider selling some puts.
Thoughts?
CAKE/Pstas – If you are allowed to not pay rent in April and you do – isn't that kind of a foolish use of cash? Government bailouts supposedly on the way to take care of that. I like CAKE, we usually have it so I agree, we should add it to the LTP down here as $18.50 is $830M and they are good for about $100M in profits so $20 is certainly more realistic – even in a crappy year.
| Year End 31st Dec | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020E | 2021E | CAGR / Avg |
|---|---|---|---|---|---|---|---|---|---|
|
$m
|
1,977 | 2,101 | 2,276 | 2,261 | 2,332 | 2,483 | 2,452 | 2,905 | 4.66% |
|
$m
|
145 | 165 | 201 | 153 | 119 | 104 | -6.47% | ||
|
$m
|
101 | 117 | 139 | 157 | 99.0 | 127 | 50.1 | 102 | 4.68% |
|
$
|
1.96 | 2.30 | 2.83 | 2.47 | 2.14 | 2.86 | 7.80% | ||
|
$
|
1.97 | 2.39 | 2.83 | 2.64 | 2.50 | 3.47 | 0.754 | 2.32 | 12.0% |
|
%
|
-5.84 | +21.1 | +18.3 | -6.49 | -5.45 | +38.9 | -78.3 | +207 | |
|
x
|
5.82 | 26.8 | 8.71 | ||||||
|
|
0.129 | 0.276 | |||||||
They only go out to 2021 but, for the LTP, lets:
- Sell 10 CAKE Jan $15 puts for $2.85 ($2,850)
- Buy 20 CAKE Jan $12.50 calls for $9 ($18,000)
- Sell 20 CAKE Jan $20 calls for $5 ($10,000)
That's net $5,150 on the $15,000 spread so $9,850 (191%) upside potential at $20 and, if not, this is a position we're very happy to double down on for the long-term. Ordinary margin requirement on the puts is just $946 and the risk is owning 1,000 shares at $20.15, which is where it is now.
Bull call spreads/Motox – Best way to play in a market like this.
