The acquisition of 13 "restaurants" by way of a script issue (in...

The acquisition of 13 "restaurants" by way of a script issue (in part) is very good business and restricts debt. It also shows the previous owners are happy to retain part ownership through CKF further underlining that they are good businesses.

Paying $14M in cash ($24.46M with script) for $4.3M in EBITDA is a reasonable multiplier, but still well short of the EBITDA:equity ratio they already have (0.176 vs 0.386) . I am hoping that the synergies CKF will bring to bear on this acquisition will increase EBITDA up to the company's average. If so, and it will likely take a couple of years, the new acquisition's EBITDA should more than double to circa $9.4M.

An anchor on the SP might be the increase in debt. CKF are already at a debt:equity of 96% and a gearing of 71.4%. This deal will take them to 102%.

Having said that, CKF is a well a managed company and they have shown they can walk the talk so, all else being equal, I'd expect the SP to head back over $5.