Meritage Hospitality Group Inc (OTC:MHGU)

Tuesday, October 13, 2015


Maintaining Our Long Position in GeoBargain MHGU

MHGU ($8.95), which wecoded a GeoBargain on June 17th at $8.50 per share, announced strong Q3 2015 results.

  • Sales of $53.3 million vs $40.7 million in the prior year

  • Net income of $1.5 million vs $800,000 in the prior year

  • EPS of $0.20 vs $0.11

  • EBITDA of $4.2 million vs $2.3 in the prior year

MHGU raised full year guidance for 2015:

  • EBITDA growth of 85% to 90% from prior guidance of 55% to 65%

  • Net Income growth of 110% to 115% from prior guidance of 100%

Quotes from management:

“During the third quarter and nine months we experienced significant earnings growth which is running ahead of our net earnings and EBITDA guidance for the year. Positive business issues contributing to the results include: lower food costs, restaurant acquisitions, new locations and strong sales associated with Wendy’s restaurant renovations.

The Company continues to focus on its people development and the integration of operating and accounting systems in newly acquired Wendy’s restaurants. We are making major capital expenditures in existing locations using new design standards for Wendy’s restaurants. Our new locations and newly renovated restaurants are providing guests with a contemporary restaurant experience, and they are rewarding us for the Wendy’s investment upgrades,” added Mr. Schermer. In addition, the Company’s chef-casual restaurants are performing well with new restaurants and renovations scheduled for 2016.”

We need to confirm current fully diluted shares outstanding with management, as it is unclear if a recent private placement or changes in exercisable options had any effect on the fully diluted shares outstanding.