QSR: Restaurent Brands International

Bought QSR at 56.41.

It is hard to value QSR properly. Based on traditional metrics like PE ratio, QSR is overvalued (PE Ratio at 39, PB 7.78, PFCF 22)

Given the company’s unique operating model as an heavily leveraged acquisition platform, I have eventually reached at EV EBITDA to value the company 12.43, which is lower than the Global Restaurent industry median of 13.12. The metrics is used as it is a capital neutral valuation metric and it suggests that QSR is fairly valued.

With 1) a strong culture of capital allocation, 2) the cost obsession of its management 3) meritocratic, performance driven and ownership centric management and 4) the Operator Owner model led by 3G Capital, QSR has the makings of a good company that is shareholder friendly.

Fundamentally, QSR has an asset light operating model that generates annuity from its Burger King business. However, acquisitions might change its operating model – Tim Hortons operations is more asset intensive at the moment. Nonetheless, as a whole the company generates substantial and reliable cash flow that can be leveraged to fund further acquisitions.

Finally, there remains tremendous room for QSR to grow its business. Global Rev 603bn vs QSR Rev 4bn in 2016.



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