KCLarkin Posted January 13, 2015 Share Posted January 13, 2015 Has anyone looked at IVFH - Innovative Food Holdings? This has higher growth rate and margins than CHEF. Looks interesting but a bit of a frankenstein business model. Have you done any work on it? 2013 Interest expense at 10% of revenue seems a bit excessive. That has to be an error in Yahoo finance or a special charge? Link to comment Share on other sites More sharing options...
Homestead31 Posted January 13, 2015 Share Posted January 13, 2015 Has anyone looked at IVFH - Innovative Food Holdings? This has higher growth rate and margins than CHEF. as i view food distribution, there are 2 things that matter: price and service. price is a function of scale - the bigger players are able to buy their inventory at lower prices by buying in bulk, and they are able to widen EBIT margins by leveraging warehouses, delivery vehicles etc. service is largely a function of geography. a local distribution center will be able to provide better service than a distant one. IVFH is tiny and thus unable to benefit from scale. IVFH is based in FL and ships its products from FL in 24-48 hours. compare that to local players that can have 12 hour delivery. yes IVFH has a higher growth rate, but that is also a function of size - they grew from 18M in sales to 23M in sales. as for higher margins, they are actually losing money so i think you may be mistaken. IVFH may work out in the end - there are really no barriers to entry in this biz - but at this point in the company's development it is speculative in my opinion. Link to comment Share on other sites More sharing options...
KCLarkin Posted January 13, 2015 Share Posted January 13, 2015 I'm out. I didn't have the cash to buy a full position so I will take my quick 40% gain and hope for another entry point. Link to comment Share on other sites More sharing options...
Homestead31 Posted January 14, 2015 Share Posted January 14, 2015 I'm out. I didn't have the cash to buy a full position so I will take my quick 40% gain and hope for another entry point. tough to get an accurate EV w/o an updated balance sheet b/c they didn't provide too much detail on how they financed the acquisition, but by my guestimate CHEF is currently trading at 12.4x 2015 adjusted EBITDA guidance and 14.4x my estimate of 2015 EBITDA. that is assuming the convert is not triggered. That obviously doesn't scream cheap, but this has never been a deep value situation - definitely more of a GARP situation - and it still fits in my view. my very rough model has them at 12.1x 2016 EBITDA and 10.7x 2017 EBITDA. obviously the further out you go, the less meaningful the assumptions are so its all very rough, but for me there is still enough of a MOS and enough easily identifiable margin widening events on the horizon to hold onto a fast growing owner operator in a consolidating industry. Link to comment Share on other sites More sharing options...
KCLarkin Posted January 14, 2015 Share Posted January 14, 2015 My sale wasn't motivated by fundamentals. I wanted to raise some cash and had an opportunity to sell CHEF into strength. I will revisit if Mr. Market puts it on sale again. Link to comment Share on other sites More sharing options...
LC Posted January 14, 2015 Share Posted January 14, 2015 Anecdotal evidence caused me to ignore this. Take everything you hear from drunks at bars with many grains of salt, my friends ;D Link to comment Share on other sites More sharing options...
Homestead31 Posted February 2, 2015 Share Posted February 2, 2015 article in the WSJ over the weekend noting that the cattle herd grew in FY 2014 for the first time in a long time. this will take some time to work its way into gross margin, but CHEF should be a real winner of the rebounding cattle herd. at ~12x fwd EBITDA it doesn't scream cheap at the moment to the deep value types, but I would argue that 12x is actually cheap for an asset light business that is growing revs at 20+% a year. Link to comment Share on other sites More sharing options...
Guest roark33 Posted February 25, 2015 Share Posted February 25, 2015 http://globenewswire.com/news-release/2015/02/25/709647/10121838/en/The-Chefs-Warehouse-Inc-Reports-Preliminary-Results-for-the-Fourth-Quarter-of-2014.html Chef pre-announced earnings. I have never completely understood why some companies do that occasionally? Link to comment Share on other sites More sharing options...
Homestead31 Posted February 25, 2015 Share Posted February 25, 2015 Chef pre-announced earnings. I have never completely understood why some companies do that occasionally? most often a pre-announce is tied to some sort of news, often negative. companies do it b/c if they don't, then the analysts complain that they're not transparent enough. basically when they pre-announce analysts get to tweak their models before the actual announcement date so then they can look like they are right and haven't been blindsided by something. in this case, maybe the small tax issue was the motivation, although it doesn't seem material to me. strange to see the stock sell of 6% on better than expected revenues and earnings that were 1 penny shy of analyst estimates due to gross margin pressure. as we all know, analyst estimates are rubbish and a .01 miss is not a big deal. as for the gross margin pressure, if people were selling on that, they are missing the forest for the trees. food inflation is already falling in most categories (notably dairy, which impacts pastry), and beef is primed to fall in the coming quarters. the time to buy is when margins are cyclically pressured, not when they are wide. the stock does not appear optically cheap, but with 20+% growth rates, cyclical problems set to reverse, and a number of efficiency measures set to come online in 2015, there is value here for patient share holders. Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 6, 2015 Share Posted March 6, 2015 http://www.sec.gov/Archives/edgar/data/1517175/000138713115000765/ex99-1.htm Chef's reported yesterday. I never really like roll-ups and especially not ones in low-margin business. They are growing the top line like crazy, but their share count is also growing. The only thing that isn't really growing is operating cash flow... Not my cup of tea, but I enjoy others' thoughts on this one... Link to comment Share on other sites More sharing options...
KCLarkin Posted March 6, 2015 Share Posted March 6, 2015 I don't think the key variable is whether a roll-up is high margin or low margin. The question is whether scale creates a competitive advantage. In Chef's case, the theory suggests that it should work (increased buying power, better inventory turnover, larger share of wallet). Previous distribution roll-ups (e.g. SYY) prove that it does work. The organic growth suggests it could work for CHEF. But as you mention, the problem is that they aren't generating enough cash to fund the roll-up so they are diluting shareholders and EPS is flat. However, there are some temporary headwinds which might be masking the value being created. Link to comment Share on other sites More sharing options...
Homestead31 Posted March 7, 2015 Share Posted March 7, 2015 i understand your concerns regarding roll ups, but in the case of CHEF each deal is really mostly about the customer list... there isn't really technology integration risk or culture clash to worry about b/c for example the NY employees aren't affected at all by what the San Fran or Vegas employees are doing... they are all just benefiting from greater scale/better procurement, and an increased SKU count to shop to their respective clients. yes - EPS has not tracked sales, but that is b/c the company is building for the future. most notably, the company has spent a few hundred million bucks building their presence in protein, which to date has been a disaster... but remember, the best time to buy is when there is blood in the streets, and that is exactly what the company is doing. the protein business - specifically beef has been way underperforming lately, but that is the time to buy. when the cycle reverses itself, CHEF will be well positioned. additionally, they are not yet realizing full operating leverage on their facilities. for example, in Chicago they have 3 buildings and a sales force, but they're not yet offering specialty items. there are similar stories in other geographies as well... basically the "bones" are there for a much bigger organization, but they haven't grown into their potential yet. as they do, operating leverage will kick in, profitability will expand, and their competitive advantage (low cost provider to high end restaurants / farm to table etc) will get stronger. Link to comment Share on other sites More sharing options...
Homestead31 Posted April 30, 2015 Share Posted April 30, 2015 CHEF has been a wild ride in recent months, and is now back to the level it was at when Arlington Value first purchased shares. Since that time the company has made progress on cost cutting such as consolidating facilities and removing duplicate rent and they made another large protein acquisition which will add ~$200M to sales. They've got more leverage now then they had in the past, but but with they way they have been growing, that'll come down quick enough. It may not scream value, but for those who like good businesses that can reinvest in themselves for years to come, this is worth taking a look at. Link to comment Share on other sites More sharing options...
KCLarkin Posted May 1, 2015 Share Posted May 1, 2015 LWC, this is my theory -- some traders piled into this based on macro factors: - low oil = more discretionary income for high end restaurants - high dollar = favor domestic importer (e.g. CHEF) over exporters - US decoupling = domestic > international This thesis made sense but given the limited liquidity, the stock decoupled from fundamentals. We are seeing this trade unwind with higher oil, lower dollar, week U.S. growth. I will probably get in soon if the markets continue down for the next few days. Link to comment Share on other sites More sharing options...
Homestead31 Posted May 13, 2015 Share Posted May 13, 2015 Gallup data indicating consumer spending on restaurants continues to rise. also good article in the WSJ yesterday about beef prices. http://www.wsj.com/articles/ranchers-beef-up-cattle-herds-1431370873 Link to comment Share on other sites More sharing options...
KCLarkin Posted June 9, 2015 Share Posted June 9, 2015 UNFI might be worth a look after tonight's drop. Link to comment Share on other sites More sharing options...
Homestead31 Posted June 9, 2015 Share Posted June 9, 2015 i've only scratched the surface on UNFI, but for a few reasons i think it is a less attractive business than CHEF. for starters, there is a customer concentration risk here as they are very connected to whole foods. second, competitive advantages from scale are harder to establish in grocery supply rather than restaurant supply due to the lack of advantage from route densitiy. in other word, a truck going to a grocery store makes a stop or 3, unloads alot at each and they're empty. a truck going to restaurants makes dozens of stops with a small amount delivered at each, so route density really drives efficiency. i would add however - w/o having done any work on it so just speculating - that there have been headlines recently about people eating at restaurants more and more and buying groceries less and less. there are some problems with the data that media is seeming to neglect, but still, weakness from UNFI could be good for CHEF and other distributors. CHEF specifically b/c if you're buying your groceries at whole foods you're more likely to be a customer of a higher-end restaurant that CHEF caters too. other anecdotal evidence worth dropping off while i'm here - record rainfall recently has really helped the heartland, and is causing ranchers to increase their retention of heifers for breeding with the goal of expanding the herd more. will take time to flow through the supply chain, but more cows = lower beef prices = the investments in beef/protein that CHEF made during the bottom of the market starts to pay off. Link to comment Share on other sites More sharing options...
KCLarkin Posted June 9, 2015 Share Posted June 9, 2015 One major difference is that UNFI has already hit scale. I'm not sure CHEF has really hit scale (with the notable exception of NYC). Link to comment Share on other sites More sharing options...
Sionnach Posted November 3, 2015 Share Posted November 3, 2015 Pretty nice 3Q beat from CHEF if anyone is following Link to comment Share on other sites More sharing options...
KCLarkin Posted November 4, 2015 Share Posted November 4, 2015 Okay. Wow. I thought it was a nice beat but wasn't expecting such a big reaction. I need to listen to the call. Link to comment Share on other sites More sharing options...
Sionnach Posted November 4, 2015 Share Posted November 4, 2015 I listened to the call, but I'm still shocked to see it open +20%. They raised guidance which may be where most of the excitement is coming from. They seem to be past the investment phase of building out their distribution network and onto generating cash to paying down debt. Any thoughts on organic growth slowing? It seems to have gone from 8% to 5% over the last couple of years. Also - how did this hold up so well during 2008? I figure the white-table style restaurants would've gotten hit pretty hard. Gross margins where stable during this time though. thanks. Link to comment Share on other sites More sharing options...
KCLarkin Posted November 5, 2015 Share Posted November 5, 2015 On the call, they mentioned that organic growth in their core business was higher than 5%. They are shedding some business at Allan bros. Link to comment Share on other sites More sharing options...
Picasso Posted August 3, 2016 Share Posted August 3, 2016 Stock back down in the dumps. Anyone have thoughts here? Link to comment Share on other sites More sharing options...
LC Posted August 3, 2016 Share Posted August 3, 2016 Yeah, I'll quote my own post from 2 years ago: Full disclosure: I met a gentleman at the pub last night who was less than excited about Chef's warehouse. Knew personally gentlemen at Sysco, had met Chris P over a long period of time, etc. Very familiar with the industry. Also, very inebriated. Attempting to read through the slurred lines was difficult, but he did allude to the fact that, "I wouldn't put your kids college fund in it". Revenue has improved 200% in 4 years, negligible impact on net income. All you need to know. Link to comment Share on other sites More sharing options...
KCLarkin Posted August 4, 2016 Share Posted August 4, 2016 Revenue has improved 200% in 4 years, negligible impact on net income. All you need to know. debt is up too. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now