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FOGO - Fogo de Chao


chesko182

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Increasing restaurant supply can hurt FOGO, but I don't think what that article is zeroing in on really affects FOGO. New restaurant owners want to own something cool (gourmet burgers, craft pizza, Michelin star absurdly expensive experience restaurants, etc) and a Brazilian steakhouse is not cool in that sense. But results have proven that cities can support 1-3 Brazilian restaurants and I doubt any of those cities will see five direct FOGO competitors suddenly pop up. Here's to hoping craft Brazilian steak doesn't become the next big thing...

 

Strictly anecdotal :/

 

I worked in Brasil from 2010 to the end of 2015 & although I loved the place, food was NOT the reason.

 

I never ate at a Fogo but did visit a multi unit restaurant called Porcão (meh...)

 

There's an Outback in Niteroi (across the bay from Rio) & it was always packed & provided a great steak at a much better price.

 

We have a Rodizio (Brasilian steak house) in my town & it's an overpriced, meh...

 

I believe Fogo will do OK in places like Orlando (Brasilians love Disney) & other larger cities but as to becoming popular with Americans (naaaa...)

 

Based on their revenues at their American stores, I think its safe to say its already popular.

 

Yes-  I think both of these are misguided.

 

1. Clearly Brazilian steakhouses appeal to more than just Brazilians..... c'mon now

2. If you really believe FOGO only competes with other Brazilian restaurants/steakhouses, you need to rethink your thesis

 

My color commentary added nothing to the discussion (I'm off to a bad start on New Years resolution #1...)

 

I still love Brasil if that helps!

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  • 9 months later...
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Company reported preliminary earnings yesterday

 

http://ir.fogodechao.com/news-releases/news-release-details/fogo-de-chao-inc-reports-preliminary-results-fiscal-third

 

Comparable restaurant sales down 5% from a combination of hurricane impact and very high comps last year in Brazil during the Olympics. Excluding hurricane U.S. down 1.4% (in-line with high end dining industry trends) and Brazil up 3% ex. locations that saw increased traffic last year from the Olympics. Revenues still growing from new store openings. JV in Saudi Arabia just opened and they plan to open two more company owned restaurants in the U.S. in the 4th quarter.

 

Stock was down 10% at some point today and I increased my position, seemed a little overdone to me especially if you believe in that the long term story and concept is intact and they can still comfortably open new locations each year (mgmt target is +10%). I think they can do 1.00+ EPS in 2018 which would put the forward PE at 11 for a company with a good growth story and some temporary setbacks.

 

From a relative value standpoint, Del Friscos trades at 26x or so and Cheesecake factory at 15x. Fogo has better margins than these two and I would argue more growth potential.

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Fogo de Chão, Inc. To Be Acquired by Rhône For $15.75 Per Share In Cash

 

https://globenewswire.com/news-release/2018/02/20/1362019/0/en/Fogo-de-Ch%C3%A3o-Inc-To-Be-Acquired-by-Rh%C3%B4ne-For-15-75-Per-Share-In-Cash.html

 

Not to happy with this outcome honestly, I think they're underpaying (fair value to me is $20-25) but again THL are pretty much forced sellers at this point as they need to close out this vintage fund. I would have rather kept this one as a compounder.

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Fogo de Chão, Inc. To Be Acquired by Rhône For $15.75 Per Share In Cash

 

https://globenewswire.com/news-release/2018/02/20/1362019/0/en/Fogo-de-Ch%C3%A3o-Inc-To-Be-Acquired-by-Rh%C3%B4ne-For-15-75-Per-Share-In-Cash.html

 

Not to happy with this outcome honestly, I think they're underpaying (fair value to me is $20-25) but again THL are pretty much forced sellers at this point as they need to close out this vintage fund. I would have rather kept this one as a compounder.

 

I agree.  It is a shame...

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