Thanks for the article! I was just a while ago looking at the company.

I invested in $DOM in London, the master franchise for Domino's. They sold their ownership in their business in Germany, but the share price did not much react to it in my opinion. I'm not sure how they will use the cash.

I think Ibersol has a lot more self-operated restaurants which have/will face big cost pressures - hopefully the cash won't be burned in the kitchen. Considering to open a small position though!

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Jan 6Liked by Carsten Mueller

Great write up and v interesting situation.

Any insight into ongoing CAPEX requirement? I can’t tell if the ~31m EUR CAPEX in 9m to Sep 22 includes the discontinued Burger King sites or not.

Very cheap on EV/EBIT but potentially not on EV/EBITDA - CAPEX if the above CAPEX numbers are reflective of ongoing CAPEX need.

Ideally what I’m trying to estimate is maintenance CAPEX, to give me a "steady state" EBITDA - CAPEX - tax yield %

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Jan 5Liked by Carsten Mueller

Was there a blog post on Muehlhan?

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In Mexico we have Alsea $ALSEA, owner of franchisees of Domino's Pizza, Starbucks, Burger King, etc. Currently ratios are 3.5x EV/EBITDA and 8x EV/EBIT (and is already really cheap way beyond 5yr averages), so yeah I do think that 2x EV/EBITDA would be a bargain.

The thing is if valuation is accurate, but I couldn't really help with that. Anyway great special situation idea!

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Jan 7Liked by Carsten Mueller

Thanks for covering Ibersol!

it is my #1 position and I find it very asymmetric at the moment. Some comments to your analysis:

• In my view, the capital increase at the end of 2021 was not so much due to a stretched B/S situation (the company was already generating a nice amount of FCF from 2Q21) but to deliver on the development contract with Burguer King (they had a commitment to open a number of restaurants). Unfortunately, Burguer King terminated the development contract because Ibersol did not deliver on a couple of openings (which were postponed by 3-4 months). I think the new owners of BK in Iberia were just seeking for an excuse to terminate this contact and push for a more aggressive expansion plan and the whole situation was a bit unfair with Ibersol.

• Accounting with IFRS 16 is a bit tricky in this case, net debt excl. leases is at €40m in 9M22 which I think is the right way to look at it (I think Ibersol has some power of negotiation on their leases if things turn sour as showed during the pandemic). For comparison purposes and to have a proxy of the underlying FCF, I tend to use EV/EBITDA pre IFRS 16 (i.e. net of leases) which implies around 4.0X before BK transaction, coming down 0.1x when adjusting for the proceeds of the sale of BK.

• I agree with the €54m estimate for 2022 EBITDA from continuing operations (post IFRS 16). The company confirmed me that no capital gains tax is expected from the sale of BK. In addition, Ibersol should benefit for 2 additional months of CF from BK restaurants (Oct and Nov which were quite strong).

• Another point on IFRS 16 is that the impact of the lease financial expenses is not linear in the P&L (it decreases over the lease term). I normally use the reported EBITDA and remove lease payments showed in the financing activities part of the CF statement. The results using both adjustments (P&L impact of leases vs. CF impact of leases) are similar but not exactly the same (happy to receive feedback on what is the right approach).

• On the use of proceeds from BK, not distributing at least the capital gains for the disposal of BK (€140m or €3.3/share) will be disappointing to me. I think they have the option to reduce the capital contributed by shareholders in the 2021 capital increase leaving €40m (€0.94 per share) tax free for shareholders.

• They had a bad M&A experience last time around (Eat Out Group in Spain acquired in 2016) so do not see them embarking into M&A (they seem to be willing to focus on the counter segment in Portugal). They have a lot of room to grow their network of restaurants in Portugal (they target 16 openings in 4Q22) from existing brands (KFC, Taco Bell and Pizza Hut) and have the know-how. In addition, they have recently signed an agreement with Pret à Manger to launch the brand in Iberia (70 restaurants in 10 years) which goes in the same direction (organic growth). I think all these initiatives can easily be funded with operating cash flow so do not see a reason why they would not distribute. Buybacks will be difficult given the very limited liquidity of the shares.

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Hi, thanks you so much!

I'm reading your piece and this other one on Ibersol too


Have you read it?

Kind regards from Madrid,


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Interesting situation, thanks for sharing!

Btw, seems that IBS has 8% of the equity capital in own shares :)


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