Boston Pizza: Superlative Yield And Performance, Where Do You Buy

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Boston Pizza edifice successful nan nighttime successful Niagara Falls, Ontario, Canada.


All values are successful CAD unless noted otherwise.

Boston Pizza Royalties Income Fund (OTC:BPZZF)(TSX:BPF.UN:CA), a Canadian casual eating brand, earns a 4% royalty connected nan gross gross earned by nan Boston Pizza restaurants successful nan royalty pool. It also earns a 1.5% distribution income owed to its ownership interest, tied again to nan apical statement income of nan royalty excavation incumbents. Since nan money inflows dangle connected nan gross sales, it is not impacted by nan fluctuations successful nan bottommost statement of nan restaurants aliases different intermediaries successful nan money structure. It has constricted obligations of its own, namely for administration, main repayment, liking connected debt, income tax, and costs to nan wide partner (in nan money structure) its pro rata information of nan distribution income. Details of nan various entities and their domiciled successful this casual eating conglomerate tin beryllium consumed from nan various reports published on nan money website, 1 of them being nan Q4-2022 MD&A. Or conscionable feast your eyes connected this reasonably straightforward statement floor plan presented below.


Fund Website - Structure

Royalty Pool

This marque of restaurants is prevalent crossed nan country, but nan Albertans and Ontarians are particularly partial to it.


Annual Information Form

The royalty excavation is adjusted annually to relationship for nan net caller restaurants opened successful nan preceding almanac year. This is done connected January 1 of each twelvemonth and nan 2023 adjustment, conscionable for illustration nan anterior mates of years saw a simplification successful nan pool.


Fund Website - Key Growth Statistics

The excavation number that is wished connected nan first time of nan twelvemonth applies to nan existent year. The 377 that was calculated connected January 1, 2023, reflects nan number of restaurants unfastened astatine nan extremity of 2022. Accordingly, these shape nan royalty excavation for 2023, conscionable for illustration 383 was nan magic number for nan 2022 financial data.

Recent Results

If Canada was suffering nether nan load of complaint hikes, nan 4th fourth results from Boston Pizza surely did not show it.

Franchise Sales of $227.2 cardinal for nan Period and $855.0 cardinal for nan Year, representing an summation of 24.0% and 29.5%, respectively, versus nan aforesaid periods 1 twelvemonth ago.

Same Restaurant Sales of 24.5% for nan Period and 30.4% for nan Year. As COVID-19 began to adversely impact income successful Boston Pizza restaurants successful March of 2020, nan Fund believes that it is besides useful to cipher and study SRS comparing 2022 Franchise Sales to 2019 Franchise Sales. If SRS were calculated comparing Franchise Sales successful nan Period and nan Year to Franchise Sales successful nan aforesaid periods successful 2019, SRS would beryllium 10.8% and 3.2%, respectively.

Source: Boston Pizza

Those are incredibly numbers moreover pinch nan 2019 baseline reset. We are still waiting for Pizza Pizza Royalty Corp. (OTCPK:PZRIF) (PZA:CA) to study Q4-2022 numbers but we uncertainty they will beryllium anyplace adjacent to this strong. While some royalty plays use from inflation, we would person thought that nan higher value constituent of Boston Pizza would activity against it successful 2022. That surely was not nan case. The institution added promotional activity and noted that January was disconnected to a very beardown commencement arsenic well.

Thank you, Michael. Boston Pizza began its first 4th of 2023 pinch our caller Pasta Tuesday each period agelong promotion, wherever guests were capable to bask pasta each time and a week starting astatine $10.99 and Gourmet Pastas were $14.99 passim January.

...And arsenic Jordan mentioned, we started 2023 pinch a beardown worth promotion successful nan shape of a pastor promotion. But successful position of nan wide trend, it's been positive.

Source: Boston Pizza Q4-2022 Conference Call Transcript

While we deliberation nan maturation rates should slow down, a lot, nan institution still looks for illustration it has immoderate runway near for 2023.

Credit Facilities

Like each companies Boston Pizza is exposed to liking complaint hikes that Bank of Canada has pushed through. Fortunately, this 1 has utilized liking complaint swaps for astir 90% of its debt.


Boston Pizza Q4-2022 MD&A

Technically, nan vulnerability to liking rates is higher than 10% arsenic nan first switch shown present has expired. Nonetheless, nan institution is good protected present and liking complaint increases will person a minimal effect for now.


Being an income fund, each of nan rate remaining aft gathering nan expenses and a reasonable reserve travel retired to nan unitholders successful nan shape of distributions. The payout ratio reflects that and comprises regular monthly payments pinch a fewer typical distributions thrown successful nan mix.


Compiled by Author from Financial Reports

The whopping payout for 2021 includes a typical distribution pertaining to 2020 that was paid successful nan consequent year.

With its astir caller summation effective November 2022, it sewage backmost to its pre-pandemic levels of paying $0.102 cents/month, which astatine its existent value ($16.26) makes it a not truthful shabby 7.5% yielder.


We person covered this banal successful nan past and were bullish connected it. This was backmost successful April 2021 and Canada was still successful nan process of disseminating nan covid-19 vaccine. We were optimistic astir what nan "return backmost to normal" successful nan not truthful distant early would look for illustration for this business. Especially taking into relationship its valuation astatine nan time. It has done rather good for itself. It moreover resoundingly hit different royalty play successful our sum universe, A&W Revenue Royalties Income Fund (OTC:AWRRF)(AW.UN:CA). On nan different manus it did way Pizza Pizza which got our support.

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That return floor plan was each astir valuation. The 2 outperformers were highly inexpensive astatine nan time, while A&W was not. Backing them complete A&W paid disconnected successful spades.

Today, Boston Pizza trades astatine astir 12.5X earnings.


Seeking Alpha

This is cheaper than wherever Pizza Pizza (14X) is placed and acold cheaper than A&W royalties (17X). This is astir nan correct aggregate for Boston Pizza precocious successful nan cycle. The banal should present dependable income but location is simply a bully downside consequence from an economical contraction arsenic good arsenic a aggregate contraction to 10X. We would see Boston Pizza acold much susceptible than either of its 2 comparatives and hence deserving of a little starting multiple. At coming we complaint it arsenic neutral and would see this a bargain nether $14.00.

Please statement that this is not financial advice. It whitethorn look for illustration it, sound for illustration it, but surprisingly, it is not. Investors are expected to do their ain owed diligence and consult pinch a master who knows their objectives and constraints.

Editor's Note: This article discusses 1 aliases much securities that do not waste and acquisition connected a awesome U.S. exchange. Please beryllium alert of nan risks associated pinch these stocks.

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Editor: Naga

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