RESTAURANTS
Dean T. Haskell
212-218-3856
DHaskell@morganjoseph.com
Julia A. Heckman
212-218-3772
jheckman@morganjoseph.com
Company Update / Price Target Change / Estimates Change
August 31, 2007
Key Metrics
$17.90
08/30/2007
$23.00
$25.11-$15.66
17.0
$304.3
100,413
86%
9.0%
8.9%
$9.86
1.8x
NA
12.90%
BNHNA - NASDAQ
Pricing Date
Price Target
52-Week Range
Shares Outstanding (mm)
Market Capitalization ($mm)
3-Mo Average Daily Volume
Institutional Ownership
Debt/Total Capital
ROE
Book Value/Share
Price/Book
Dividend Yield
LTM EBITDA Margin
Benihana, Inc.
Rating: Buy
F1Q08 EPS Disappoints on G&A Investments;
Lowering Estimates; PT to $23; BUY
Investment Highlights:
■
G&A investment impacts EPS results. Benihana announced F1Q08
EPS of $0.25 vs. $0.26 Y/Y, down 4%, as management made
substantial investments in G&A. Consensus EPS were $0.28. Revenues
and SSS, which had been pre-released in early August, had given us
confidence in our below-consensus estimate. Management spent
$1.7mm more in G&A than we expected; a $0.06 EPS impact. SSS
continue to exceed our estimate, as well as the company's casual dining
competitors.
■
Flat margins not enough; Down margins were expected. Operating
margins of 17.6% were flat. Actual margins were well above our 16.2%
margin estimate. Food costs were 23.5%, well below our 24.4%
estimate on the positive impact of a 7% price increase at the Benihana
concept and favorable pricing in chicken (fresh, no longer frozen).
Labor costs of 33.4% were in line with our estimate. Other operating
expenses and occupancy costs were in line with estimates, but D&A
was substantially lower than our previously upwardly revised cost
estimate. D&A jumped $700,000 from last year, and included $1.1mm
of accelerated D&A due to the ongoing remodel program ($1.0mm in
F1Q07).
■
Unit growth remains on track. We continue to expect the company to
open two Benihanas in FY08. One opened last month and we expect the
other to open in the F2Q08. We expect the company to open two Harus;
both by the end of Calendar 2007. We also expect six RA Sushi's to
open in FY08. One opened in F1Q08 and others are under construction.
■
Reducing estimates for G&A investments. Our FY08 EPS estimate
falls from $0.88 to $0.80, as a result of $3.2mm increase in G&A costs.
Management continues to invest in personnel in the following areas:
technology, training and operational supervisory, real estate and
construction personnel. We believe these investments (though difficult
to swallow in what was expected to be a pivotal year in earnings
growth), are essential to the long-term successful deployment of capital
into aggressive new unit development.
■
Valuation remains attractive. Shares got beaten up in the recent
market down draft and continue to trade at a discount to the peer group
EV/EBITDA of 7.5x. The recent 3:2 split took the first step in resolving
the liquidity issue that has hampered share prices. Shares currently
trade 7.1x our expected EBITDA of $42.8mm. Our revised price target
of $23, down from $27, reflects a lower target EV/EBITDA multiple,
moving from 10x to 9x.
EPS($) FY: March
1Q-Jun
2Q-Sep
3Q-Dec
4Q-Mar
FY
P/E
Prior
Curr.
Prior
Curr.
2007A
2008E
2008E
2009E
2009E
0.26
0.27E
0.25A
--0.15
0.15E
0.14E
--0.19
0.22E
0.17E
--0.23
0.25E
0.24E
--0.84
0.88E
0.80E
-0.95E
21.3x
22.4x
18.8x
Revenue($mm)
1Q-Jun
2Q-Sep
3Q-Dec
4Q-Mar
FY
Prior
Curr.
Prior
Curr.
2007A
2008E
2008E
2009E
2009E
79.9
90.0E
89.9A
--58.9
65.6E
66.6E
--62.2
69.1E
70.1E
--71.6
85.1E
77.1E
--272.6
309.8E
303.8E
-346.8E
1 Year Price History for BNHNA
24
21
18
15
Q3
Q1
Q2
12
9
2007
Created by BlueMatrix
Company Description: Benihana, Inc. (www.benihana.com) is the
largest operator of teppanyaki-style Japanese restaurants in the US.
The company currently owns and operates 59 Benihana restaurants
around the country and franchises 22 others. The company also
operates seven Haru and 14 RA Sushi restaurants.
The Disclosure section may be found on pages 6 - 7 of this report.
The Valuation section may be found on page 6 of this report.
Benihana, Inc.
August 31, 2007
G&A investment impacts EPS results. Benihana announced 1Q08 EPS of $0.25 vs. $0.26 last year, down
4%, as management made substantial investments in G&A. Consensus EPS was $0.28. Revenues and SSS,
which had been pre-released in early August, had given us confidence in our below-consensus estimate.
Management spent $1.7mm more in G&A than we expected; a $0.06 EPS impact. SSS continue to exceed our
estimates, as well as the company's casual dining competitors. F2Q08 trends remain in line with F1Q08 SSS of
6.2% at Benihana, 10.3% at Haru and 4.4% at RA Sushi. Last year's comparables were very difficult at 7.7%,
10.6%,and 18.6%, respectively. SSS get the most difficult in F2Q08 and remain difficult through the end of
the year. SSS in FY09 should be against a normalized single-digit comp in all brands. Of note, management
expects to take a 3%-4% price increase at the Haru and RA Sushi brands at the beginning of F3Q08.
Flat margins not enough; down margins were expected. Operating margins of 17.6% were essentially flat
with last year's F1Q07. Given the impact that remodeled stores have had on the P&L over the last few quarters
(as management maintains skilled labor at closed stores), we are impressed with the flat margins. Actual
margins were well above our 16.2% margin estimate. Food costs were 23.5%, well below our 24.4% estimate
on the positive impact of a 7% price increase at the Benihana concept and favorable pricing in chicken (fresh,
no longer frozen). We had anticipated that beef costs (the company's largest single food cost item) would net
no gain in food costs. Labor costs of 33.4% were in line with our estimate and were not leveraged by the
higher menu pricing. Other operating expenses and Occupancy costs were in line with our estimates, but D&A
were substantially lower than our previously upwardly revised cost estimate. D&A jumped $700,000 from last
year, and included $1.1mm of accelerated D&A due to the ongoing remodel program ($1.0mm in F1Q07).
Unit growth remains on track. We continue to expect the company to open two Benihanas in FY08. One
opened last month and we expect the other to open in the 2Q08. We expect the company to open two Harus;
both by the end of Calendar 2007. We also expect six RA Sushi's to open in FY08. One opened in the 1Q08
and others are under construction. In FY09, we expect the company to open two Benihanas, two Harus, and
nine RA Sushis for a development rate of 15% annually.
Reducing estimates for G&A investments; operating margin expectations rise. Our FY08 (March) EPS
estimate falls from $0.88 to $0.80, as a result of a $3.2mm increase in G&A costs. CY08 EPS falls from $1.09
to $0.94, resulting from the combined impacts of lower revenue, higher D&A and higher G&A. Management
continues to invest in personnel in the following areas; technology, training and operational supervisory, real
estate and construction personnel. We believe that these investments, though difficult to swallow in what was
expected to be a pivotal year in earnings growth, are essential to the long-term successful deployment of
capital into aggressive new unit development. Our estimated unit level operating margins have improved from
16.1% to 16.6% on the strength of the F1Q08 operating results. However, FY08 operating margins are still
expected to fall, down approximately 20bps to 16.6% from last year's 16.8% actual results.
Valuation remains attractive. Shares got beaten up in the recent market down draft and continue to trade at a
discount to the peer group of 7.5x EV/EBITDA. The recent 3:2 split has taken the first step, of many, in
resolving the lack of trading liquidity issue that has hampered share prices. Shares currently trade at 19.0x on
our revised CY08 EPS estimate of $0.94 and 7.1x our expected EBITDA of $42.8mm. Our revised price target
of $23, down from $27, reflects an EV/EBITDA multiple reduction from 10x to 9x, to better reflect the recent
disappointment in EPS and market reductions in overall valuations.
2
MORGAN JOSEPH & CO. INC.
Benihana, Inc.
August 31, 2007
Benihana Inc.
Income Statement
March 52-53 week fiscal year
($s in 000s, except per share data)
30-Mar-03
FY2003
52 weeks
28-Mar-04
FY2004
52 weeks
27-Mar-05
FY2005
52 weeks
$187,913
1,331
189,244
$201,335
1,628
202,963
$216,756
1,574
$218,330
$244,032
1,521
245,553
$79,396
497
79,893
$58,583
346
58,929
$61,867
335
62,202
$71,234
391
71,625
$271,080
1,569
272,649
$89,369
566
89,935
$66,250
350
66,600
$69,750
380
70,130
$76,781
354
77,135
$302,150
1,650
303,800
$345,000
1,750
346,750
$382,000
1,750
383,750
$420,000
1,750
421,750
46,182
70,262
14,929
19,782
7,077
51,437
71,812
16,764
21,294
8,313
53,371
76,027
18,068
23,122
9,607
59,014
81,398
20,288
26,280
11,467
19,129
26,324
6,639
9,026
4,225
14,336
20,231
5,270
6,947
2,939
15,153
20,962
5,359
6,739
3,135
17,433
24,386
6,172
8,032
3,070
66,051
91,903
23,440
30,744
13,369
21,035
29,865
7,708
10,123
4,901
16,231
22,393
5,830
7,685
3,900
17,089
23,576
5,929
7,603
4,150
18,765
25,992
6,518
8,430
4,249
73,120
101,825
25,985
33,841
17,200
85,819
116,610
28,290
37,950
18,000
95,500
128,352
30,942
41,256
19,750
105,000
141,120
34,440
45,360
21,750
29,681
31,715
36,561
45,585
14,053
8,860
10,519
12,141
45,573
15,737
10,211
11,404
12,827
50,179
58,331
66,200
72,330
(501)
(15,512)
(528)
(477)
-
(2,088)
(16,362)
(457)
(643)
-
(1,304)
(20,940)
(298)
(585)
(2,668)
-
(1,270)
(22,693)
88
(178)
-
(481)
(7,249)
127
-
(230)
(5,057)
125
-
(363)
(5,322)
(33)
-
(461)
(6,183)
246
-
(1,535)
(23,811)
465
-
(709)
(9,026)
25
-
(650)
(6,200)
(50)
-
(600)
(6,500)
(50)
-
(41)
(6,724)
(75)
-
(2,000)
(28,450)
(150)
-
(2,350)
(31,500)
(600)
-
(2,150)
(33,500)
(1,100)
-
(2,000)
(35,000)
(800)
-
13,994
(4,725)
9,269
13,793
(4,821)
8,972
12,340
(4,520)
7,820
23,053
(8,491)
14,562
6,947
(2,426)
4,521
4,044
(1,488)
2,556
5,136
(1,923)
3,213
6,134
(1,929)
4,205
22,261
(7,766)
14,495
6,593
(2,387)
4,206
3,661
(1,281)
2,380
4,634
(1,622)
3,012
6,341
(2,140)
4,201
21,229
(7,430)
13,799
25,631
(8,971)
16,660
31,200
(10,920)
20,280
36,280
(12,698)
23,582
$264
$1,430
334
250
272
248
$1,104
334
250
250
316
$1,150
$1,150
$1,150
$1,150
$0.66
$0.65
$0.93
$0.26
$0.15
$0.19
$0.23
$0.84
$0.25
$0.14
$0.17
$0.24
$0.80
$0.95
$1.10
$1.25
14,114
13,733
$0.59
$0.75
15,221
16,007
17,166
17,228
17,333
17,387
17,277
17,010
17,200
17,400
17,470
17,250
17,650
18,100
18,700
$0.64
$0.58
$0.91
$0.84
$0.94
$1.07
$1.23
$1.43
Growth (YoY):
Restaurant revenue
Total revenue
Restaurant operating profit
Marketing, general & administrative
Pre-tax income
Net income
EPS
10.5%
10.3%
7.6%
16.0%
8.3%
5.0%
-11.3%
7.1%
7.2%
6.9%
5.5%
-1.4%
-3.2%
-0.5%
7.7%
7.6%
15.3%
28.0%
-10.5%
-12.8%
-9.0%
12.6%
12.5%
24.7%
8.4%
86.8%
86.2%
55.8%
7.9%
7.9%
5.0%
15.9%
-0.7%
0.5%
-12.1%
7.9%
7.9%
-7.5%
0.7%
-12.2%
-10.2%
-15.0%
11.8%
11.8%
1.9%
6.9%
-5.0%
-2.6%
-10.8%
17.2%
17.0%
-1.2%
-3.9%
1.5%
7.3%
-2.1%
11.1%
11.0%
0.0%
4.9%
-3.4%
-0.5%
-9.4%
12.6%
12.6%
12.0%
24.5%
-5.1%
-7.0%
-6.3%
13.1%
13.0%
15.3%
22.6%
-9.5%
-6.9%
-10.1%
12.7%
12.7%
8.4%
22.1%
-9.8%
-6.2%
-6.6%
7.8%
7.7%
5.6%
8.7%
3.4%
-0.1%
3.7%
11.5%
11.4%
10.1%
19.5%
-4.6%
-4.8%
-4.7%
14.2%
14.1%
16.2%
10.7%
20.7%
20.7%
18.9%
10.7%
10.7%
13.5%
6.3%
21.7%
21.7%
15.4%
9.9%
9.9%
9.3%
4.5%
16.3%
16.3%
13.7%
Expense Ratios:
Food & beverage
Labor & related costs
Utilities & occupancy costs
Other operating expenses
Depreciation and amortization
Restaurant opening costs
Marketing, general & administrative
Interest income/(expense)
Minority Interest
Income taxes
24.6%
37.4%
7.9%
10.5%
3.8%
-0.3%
8.2%
-0.3%
-0.3%
33.8%
25.5%
35.7%
8.3%
10.6%
4.1%
-1.0%
8.1%
-0.2%
-0.3%
35.0%
24.6%
35.1%
8.3%
10.7%
4.4%
-0.6%
9.6%
-0.1%
-0.3%
36.6%
24.2%
33.4%
8.3%
10.8%
4.7%
-0.5%
9.2%
0.0%
-0.1%
36.8%
24.1%
33.2%
8.4%
11.4%
5.3%
-0.6%
9.1%
0.2%
0.0%
34.9%
24.5%
34.5%
9.0%
11.9%
5.0%
-0.4%
8.6%
0.2%
0.0%
36.8%
24.5%
33.9%
8.7%
10.9%
5.1%
-0.6%
8.6%
-0.1%
0.0%
37.4%
24.5%
34.2%
8.7%
11.3%
4.3%
-0.6%
8.6%
0.3%
0.0%
31.4%
24.4%
33.9%
8.6%
11.3%
4.9%
-0.6%
8.7%
0.2%
0.0%
34.9%
23.5%
33.4%
8.6%
11.3%
5.5%
-0.8%
10.0%
0.0%
0.0%
36.2%
24.5%
33.8%
8.8%
11.6%
5.9%
-1.0%
9.3%
-0.1%
0.0%
35.0%
24.5%
33.8%
8.5%
10.9%
5.9%
-0.9%
9.3%
-0.1%
0.0%
35.0%
24.4%
33.9%
8.5%
11.0%
5.5%
-0.1%
8.7%
-0.1%
0.0%
33.7%
24.2%
33.7%
8.6%
11.2%
5.7%
-0.7%
9.4%
0.0%
0.0%
35.0%
24.9%
33.8%
8.2%
11.0%
5.2%
-0.7%
9.1%
-0.2%
0.0%
35.0%
25.0%
33.6%
8.1%
10.8%
5.2%
-0.6%
8.7%
-0.3%
0.0%
35.0%
25.0%
33.6%
8.2%
10.8%
5.2%
-0.5%
8.3%
-0.2%
0.0%
35.0%
15.8%
11.0%
7.7%
7.7%
7.4%
4.9%
15.8%
11.3%
7.0%
7.0%
6.8%
4.4%
16.9%
11.3%
5.8%
5.8%
5.7%
3.6%
18.7%
13.9%
9.4%
9.4%
9.4%
5.9%
17.7%
13.8%
8.5%
9.0%
8.7%
5.7%
15.1%
11.4%
6.7%
8.6%
6.9%
4.3%
17.0%
13.4%
8.3%
8.3%
8.3%
5.2%
17.0%
12.6%
8.2%
8.0%
8.6%
5.9%
16.8%
12.9%
8.0%
8.0%
8.2%
5.3%
17.6%
12.9%
7.3%
7.6%
7.3%
4.7%
15.4%
11.9%
5.6%
7.3%
5.5%
3.6%
16.4%
12.9%
6.7%
7.0%
6.6%
4.3%
16.7%
13.4%
8.3%
7.0%
8.2%
5.4%
16.6%
12.8%
7.0%
7.0%
7.0%
4.5%
16.9%
12.9%
7.6%
7.6%
7.4%
4.8%
17.3%
13.7%
8.4%
8.4%
8.1%
5.3%
17.2%
14.0%
8.8%
8.8%
8.6%
5.6%
Revenues:
Restaurant sales
Franchise fees & royalties
Total Revenues
Expenses:
Cost of food & beverage sales
Labor & related costs
Utilities & occupancy costs
Other operating expenses
Depreciation and amortization
Restaurant operating profit
Restaurant opening costs
Marketing, general & administrative
Interest income/(expense)
Minority interest
Impairment Charge
Other income/(expense)
Pre-tax income
Taxes
Net income
Preferred Stock Accr. & Div.
Common Share EPS - Diluted
EPS - Before Extraordinary
Diluted shares outstanding
Calendar EPS
Margins:
Restaurant operating profit
Company EBITDA
Company EBIT margin
Company EBIT margin (ttm)
Pretax
Net
Source: Company reports & Morgan Joseph estimates.
3
26-Mar-06
FY2006
52 weeks
16-Jul-06
1Q07
16 weeks
8-Oct-06
2Q07
12 weeks
31-Dec-06
3Q07
12 weeks
1-Apr-07
4Q07
13 weeks
$0.84
MORGAN JOSEPH & CO. INC.
1-Apr-07
FY2007
53 weeks
22-Jul-07
1Q08
16 weeks
14-Oct-07
2Q08E
12 weeks
$0.79
6-Jan-08
3Q08E
12 weeks
30-Mar-08
4Q08E
12 weeks
$0.79
30-Mar-08
FY2008E
52 weeks
29-Mar-09
FY2009E
52 weeks
28-Mar-10
FY2010E
52 weeks
27-Mar-11
FY2011E
52 weeks
Benihana, Inc.
August 31, 2007
Benihana Inc. Unit Analysis
Period Ending:
March 52-53 week fiscal year
30-Mar-03
FY2003
52 weeks
Owned Units:
Benihana
Haru
RA Sushi
Sushi Doraku
Total
% change
54
5
4
1
64
8.5%
Franchised Benihana Units:
22
Unit Growth Rate by Concept
Co Benihana
Haru
RA Sushi
Fran. Benihana
3.8%
0.0%
N.A.
37.5%
Total Sales by Concept
Benihana
Haru
RA Sushi
Sushi Doraku
Total Sales
$162,741
20,181
3,226
1,765
$187,913
28-Mar-04
FY2004
52 weeks
3-Apr-05
FY2005
52 weeks
26-Mar-06
FY2006
52 weeks
16-Jul-06
1Q07
16 weeks
8-Oct-06 31-Dec-06
2Q07
3Q07
12 weeks 12 weeks
1-Apr-07
4Q07
13 weeks
1-Apr-07
FY2007
53 weeks
22-Jul-07
1Q08
16 weeks
14-Oct-07
2Q08E
12 weeks
6-Jan-08
3Q08E
12 weeks
30-Mar-08
4Q08E
13 weeks
30-Mar-08
FY2008E
52 weeks
29-Mar-09
FY2009E
52 weeks
28-Mar-10
FY2010E
52 weeks
27-Mar-11
FY2011E
52 weeks
56
5
7
1
69
7.8%
56
6
8
1
71
2.9%
56
7
9
1
73
2.8%
56
7
11
74
2.8%
58
7
11
76
4.1%
59
7
13
79
9.7%
59
7
13
79
8.2%
59
7
13
79
8.2%
59
7
14
80
8.1%
60
7
16
83
9.2%
60
8
18
86
8.9%
61
9
19
89
12.7%
61
9
19
89
12.7%
63
11
28
102
14.6%
65
13
37
115
12.7%
67
15
46
128
11.3%
23
24
21
21
22
22
22
22
22
23
23
23
23
24
25
26
3.7%
0.0%
75.0%
4.5%
0.0%
20.0%
14.3%
4.3%
0.0%
16.7%
12.5%
-12.5%
0.0%
0.0%
37.5%
0.0%
1.8%
0.0%
37.5%
4.8%
5.4%
0.0%
62.5%
4.8%
5.4%
0.0%
44.4%
4.8%
5.4%
0.0%
44.4%
4.8%
5.4%
0.0%
27.3%
4.8%
3.4%
0.0%
45.5%
4.5%
1.7%
14.3%
38.5%
4.5%
3.4%
28.6%
46.2%
4.5%
3.4%
28.6%
46.2%
4.5%
3.3%
22.2%
47.4%
4.3%
3.2%
18.2%
32.1%
4.2%
3.1%
15.4%
24.3%
4.0%
$43,205
7,168
8,210
N.A
$58,583
$46,061
7,178
8,628
N.A
$61,867
$52,492
7,883
10,859
N.A
$71,234
$65,514
10,405
13,450
N.A
$89,369
$46,000
8,000
12,250
N.A
$66,250
$48,000
8,500
13,250
N.A
$69,750
$50,486
10,245
16,050
N.A
$76,781
$210,000
37,150
55,000
N.A.
$302,150
$220,000
45,000
80,000
N.A.
$345,000
$230,000
52,000
100,000
N.A.
$382,000
$240,000
60,000
120,000
N.A.
$420,000
$166,452
21,871
11,574
1,438
$201,335
$175,045
22,785
17,334
1,592
$216,756
$189,797
27,662
24,619
1,954
$244,032
$58,490
9,432
11,289
185
$79,396
$200,248
31,661
38,986
185
$271,080
% of Revenue by Concept
Benihana
Haru
RA Sushi
Sushi Doraku
86.6%
10.7%
1.7%
0.9%
82.7%
10.9%
5.7%
0.7%
80.8%
10.5%
8.0%
0.7%
77.8%
11.3%
10.1%
0.8%
73.7%
11.9%
14.2%
0.2%
73.8%
12.2%
14.0%
N.A
74.5%
11.6%
13.9%
N.A
73.7%
11.1%
15.2%
N.A
73.9%
11.7%
14.4%
0.1%
73.3%
11.6%
15.0%
N.A
69.4%
12.1%
18.5%
N.A
68.8%
12.2%
19.0%
N.A
65.8%
13.3%
20.9%
N.A
69.5%
12.3%
18.2%
NA
63.8%
13.0%
23.2%
NA
60.2%
13.6%
26.2%
NA
57.1%
14.3%
28.6%
NA
Restaurant Revenue Growth by Concept
Benihana
Haru
RA Sushi
Sushi Doraku
Total Change in Sales
5.8%
40.7%
N.A.
-6.8%
10.5%
2.3%
8.4%
N.A.
-18.5%
7.1%
5.2%
4.2%
49.8%
10.7%
7.7%
8.4%
21.4%
42.0%
22.7%
12.6%
1.2%
14.5%
60.4%
NA
7.9%
7.3%
-3.6%
23.5%
NA
7.0%
6.6%
14.5%
59.9%
NA
11.8%
8.2%
37.7%
96.2%
NA
18.1%
5.5%
14.5%
58.4%
NA
11.1%
12.0%
10.3%
19.1%
NA
6.5%
11.6%
49.2%
NA
4.2%
18.4%
53.6%
NA
-3.8%
30.0%
47.8%
NA
4.9%
17.3%
41.1%
NA
11.5%
4.8%
21.1%
45.5%
NA
14.2%
4.5%
15.6%
25.0%
NA
10.7%
4.3%
15.4%
20.0%
NA
9.9%
$7,777
2,294
2,381
N.A
$12,452
$8,291
2,297
2,502
N.A
$13,090
$9,449
2,523
3,149
N.A
$15,120
$11,793
3,330
3,901
NA
$19,023
$8,280
2,560
3,553
NA
$14,393
$8,640
2,720
3,843
NA
$15,203
$9,087
3,278
4,655
NA
$17,020
$37,800
11,888
15,950
N.A.
$65,638
$39,600
14,400
23,200
N.A.
$77,200
$41,400
16,640
29,000
N.A.
$87,040
$43,200
19,200
34,800
N.A.
$97,200
Estimated Concept Op. EBITDA
Benihana @ 18%
Haru @32%
RA Sushi @29%
Sushi Doraku %25%
Total Operating EBITDA
% of Total Restaurant Profits
Benihana
Haru
RA Sushi
Sushi Doraku
Restaurant Profit Growth by Concept
Benihana
Haru
RA Sushi
Sushi Doraku
Total Operating EBITDA
Avg. Unit Volume by Concept
Benihana
Haru
RA Sushi
Sushi Doraku
Total
$29,293
6,458
936
441
$37,128
% Change Comp sales by Concept:
Benihana
Haru
RA Sushi
Sushi Doraku
Average Comp Unit Weekly Sales
Benihana
Haru
RA Sushi
Sushi Doraku
$31,508
7,291
5,027
398
$44,224
$34,163
8,852
7,140
489
$50,643
$10,528
3,018
3,274
46
$16,867
74%
17%
8%
1%
71%
16%
11%
1%
67%
17%
14%
1%
62%
18%
19%
0%
62%
18%
19%
N.A
63%
18%
19%
N.A
62%
17%
21%
N.A
63%
18%
20%
0%
62%
18%
21%
N.A
58%
18%
25%
N.A
57%
18%
25%
N.A
53%
19%
27%
N.A
58%
18%
24%
NA
51%
19%
30%
NA
48%
19%
33%
NA
44%
20%
36%
NA
5.8%
40.7%
N.A.
-6.8%
13.4%
2.3%
8.4%
N.A.
-18.5%
9.6%
5.2%
4.2%
49.8%
10.7%
8.7%
8.4%
21.4%
42.0%
22.7%
14.5%
1.2%
14.5%
60.4%
-66.8%
10.8%
7.3%
-3.6%
23.5%
N.A
6.8%
6.6%
14.5%
59.9%
N.A
14.2%
8.2%
37.7%
96.2%
N.A
22.9%
5.5%
14.5%
58.4%
N.A.
13.6%
12.0%
10.3%
19.1%
N.A
12.8%
6.5%
11.6%
49.2%
N.A
15.6%
4.2%
18.4%
53.6%
N.A
16.1%
-3.8%
30.0%
47.8%
N.A
12.6%
4.9%
17.3%
41.1%
N.A.
14.1%
4.8%
21.1%
45.5%
N.A.
17.6%
4.5%
15.6%
25.0%
N.A.
12.7%
4.3%
15.4%
20.0%
N.A.
11.7%
$1,044
1,347
1,129
N.A
$1,080
$758
1,024
746
N.A
$781
$787
1,025
719
N.A
$798
$890
1,126
835
N.A
$902
$773
1,143
817
N.A
813 $
$800
1,133
779
N.A
825 $
$834
1,205
868
N.A
877
$3,500
4,644
3,438
N.A.
$3,597
$3,548
4,500
3,404
N.A.
$3,613
$3,594
4,333
3,077
N.A.
$3,521
$3,636
4,286
2,892
N.A.
$3,457
$57,574
$42,900
$44,000 $
10,405
10,300
10,500
11,785
6,800
6,300
N.A
N.A
N.A
79,764 $ 60,000 $ 60,800 $
6.4%
10.5%
10.1%
47,526
11,295
6,615
N.A
65,436
11.5%
$192,000
42,500
31,500
N.A.
$266,000
9.4%
$199,000
41,250
50,500
N.A.
$290,750
9.3%
$208,000
48,000
79,000
N.A.
$335,000
15.2%
$220,000
59,500
104,000
N.A.
$383,500
14.5%
$3,026
4,374
2,104
1,438
$3,028
$3,126
4,143
2,311
1,592
$3,097
$3,325
4,175
2,842
1,917
$3,325
$3,483
4,523
3,544
370
$3,567
$1,110
1,486
996
N.A
$ 1,124 $
$156,160
14,628
1,625
1,564
$173,977
5.4%
$158,905
21,871
6,723
1,439
$188,938
8.6%
$165,500
22,420
12,750
1,592
$202,262
7.1%
$181,399
23,428
22,529
1,954
$229,310
13.4%
$57,516
9,104
8,350
185
$75,155
14.1%
$41,036
7,168
6,096
N.A
$54,300
14.6%
$41,984
7,178
6,040
N.A
$55,202
7.3%
$43,995
7,266
7,406
N.A
$58,667
5.7%
2.8%
21.1%
41.7%
1.8%
49.5%
313.7%
-8.0%
4.2%
2.5%
12.8%
10.6%
7.2%
4.5%
40.2%
22.7%
7.7%
10.6%
18.6%
5.7%
2.9%
35.0%
15.1%
N.A
8.1%
14.5%
11.9%
N.A
4.7%
9.1%
9.2%
N.A
7.4%
11.0%
13.3%
N.A.
6.2%
10.3%
4.4%
N.A
4.5%
2.6%
4.6%
N.A
2.9%
4.5%
4.3%
N.A
7.1%
22.1%
-15.9%
N.A
5.2%
9.9%
-0.7%
N.A.
1.1%
-4.9%
19.1%
N.A.
0.8%
9.7%
13.4%
N.A.
2.3%
-4.4%
-0.9%
N.A.
$63.6
113.8
74.6
11.6
$60.5
119.5
67.7
N.A
$63.0
119.6
62.9
N.A
$66.1
110.1
77.1
N.A
$3,295.2
5,119.3
3,718.9
N.A.
$64.3
100.0
92.1
N.A
$63.3
122.6
70.8
N.A
$64.9
125.0
65.6
N.A
$70.7
134.5
64.9
N.A
$3,428.6
6,071.4
3,705.9
N.A.
$3,372.9
5,892.9
4,590.9
N.A.
$3,409.8
5,333.3
4,937.5
N.A.
$3,492.1
5,409.1
4,425.5
N.A.
$2,946.4
2,925.6
812.5
1,042.7
$3,055.9
4,374.2
3,361.5
1,439.0
$3,064.8
4,484.0
2,550.0
1,592.0
$3,239.3
4,685.6
3,574.2
1,954.0
Source: Company reports & Morgan Joseph estimates.
4
$36,045
10,132
11,306
46
$57,528
79%
17%
3%
1%
$3,071
4,036
1,613
1,177
$3,055
Comp Sales by Concept:
Benihana
Haru
RA Sushi
Sushi Doraku
Total
% change
$29,961
6,999
3,356
360
$40,676
MORGAN JOSEPH & CO. INC.
$184,531
30,716
27,892
N.A.
$243,139 $
8.5%
Benihana, Inc.
August 31, 2007
Casual Dining Comparable Valuation Analysis
August 30, 2007
8/30/07
52-Wk
52-Wk
3 Mo. Avg.
Fully Diluted
Price
High
Low
Volume
Shares (MM)
Enterprise
Cap
Value (MM)
Symbol
Rating
Benihana National Class A Ord Shs
BNHNA
Buy
$17.90
$33.82
$16.09
91,905
17.0
(1.7)
$304.5
$302.8
EAT
NR
$28.30
$35.74
$25.48
1,685,850
105.1
743.4
$2,975.7
$3,719.2
$6,454.9
Brinker International Inc
Darden Restaurants Inc
McCormick & Schmick's Seafood Restaurants Inc
Mortons Restaurant Group Inc
Net Debt
Market
Company
DRI
NR
$40.55
$47.60
$35.18
1,504,700
141.7
709.8
$5,745.1
MSSR
Buy
$27.04
$30.98
$19.10
100,318
14.7
(10.6)
$397.5
$387.0
MRT
NR
$17.83
$20.82
$14.45
149,341
17.4
50.5
$309.9
$360.4
P.F. Chang's China Bistro, Inc
PFCB
NR
$33.65
$47.10
$31.63
658,000
25.8
11.7
$868.4
$880.1
Cheesecake Factory Inc
CAKE
NR
$24.96
$29.78
$24.05
1,528,510
72.2
87.7
$1,800.9
$1,888.6
Symbol
C2006
C2007E
C2008E
C2006
C2007E
C2008E
C2006
C2007E
Brinker International Inc
EAT
$4,423.2
$4,423.2
$4,494.8
9.6%
0.0%
1.6%
12.4%
12.0%
12.1%
Darden Restaurants Inc
DRI
$5,827.6
$5,860.0
$6,468.9
5.9%
0.6%
10.4%
13.1%
13.6%
13.3%
REVENUE
Revenue
Company
McCormick & Schmick's Seafood Restaurants Inc
Revenue Growth
EBITDA/REV
C2008E
MSSR
$308.3
$368.0
$425.0
10.6%
19.4%
15.5%
9.7%
10.2%
10.8%
Mortons Restaurant Group Inc
MRT
$322.0
$356.5
$397.1
7.1%
10.7%
11.4%
NM
12.4%
12.5%
P.F. Chang's China Bistro, Inc
PFCB
$937.6
$1,096.1
$1,276.2
15.9%
16.9%
16.4%
10.5%
9.9%
10.0%
Cheesecake Factory Inc
CAKE
$1,315.3
$1,535.0
$1,794.4
11.7%
16.7%
16.9%
12.2%
12.7%
12.8%
10.1%
10.7%
12.0%
11.5%
11.8%
11.9%
$329.8
9.7%
13.7%
10.5%
13.6%
12.4%
13.0%
AVERAGE
Benihana National Class A Ord Shs
BNHNA
$262.2
$298.3
Symbol
C2006
C2007E
C2008E
C2006
C2007E
C2008E
C2006
C2007E
Brinker International Inc
EAT
$546.3
$530.2
$545.6
10.3%
-2.9%
2.9%
6.8x
7.0x
6.8x
Darden Restaurants Inc
DRI
$761.8
$794.8
$859.0
5.4%
4.3%
8.1%
8.5x
8.1x
7.5x
8.4x
EBITDA
EBITDA
Company
McCormick & Schmick's Seafood Restaurants Inc
EBITDA Growth
EV/EBITDA
C2008E
MSSR
$29.8
$37.5
$45.9
14.0%
25.9%
22.5%
13.0x
10.3x
Mortons Restaurant Group Inc
MRT
NM
$44.0
$49.5
NM
NM
12.3%
NM
8.2x
7.3x
P.F. Chang's China Bistro, Inc
PFCB
$98.1
$108.6
$127.2
0.0%
10.7%
17.1%
9.0x
8.1x
6.9x
Cheesecake Factory Inc
CAKE
$159.9
$195.4
$229.1
-8.3%
22.2%
17.3%
11.8x
9.7x
8.2x
4.3%
12.0%
13.4%
9.8x
8.6x
7.5x
$42.8
9.1%
3.7%
16.1%
8.5x
8.2x
7.1x
AVERAGE
Benihana National Class A Ord Shs
BNHNA
$35.6
$36.9
Symbol
C2006
C2007E
C2008E
C2006
C2007E
C2008E
C2006
C2007E
Brinker International Inc
EAT
$1.66
$1.87
$2.03
11.4%
12.7%
8.6%
17.0x
15.1x
13.9x
Darden Restaurants Inc
DRI
$2.27
$2.59
$2.96
15.8%
14.1%
14.3%
17.9x
15.7x
13.7x
EPS
EPS
Company
McCormick & Schmick's Seafood Restaurants Inc
EPS Growth
P/E
C2008E
MSSR
$0.92
$1.15
$1.33
17.9%
25.0%
15.7%
29.4x
23.5x
20.3x
Mortons Restaurant Group Inc
MRT
$0.82
$0.91
$1.08
NM
11.0%
18.7%
21.7x
19.6x
16.5x
P.F. Chang's China Bistro, Inc
PFCB
$1.24
$1.34
$1.56
-11.4%
8.1%
16.4%
27.1x
25.1x
21.6x
Cheesecake Factory Inc
CAKE
$1.02
$1.13
$1.33
-6.4%
10.8%
17.7%
24.5x
22.1x
18.8x
5.5%
13.6%
15.2%
22.9x
20.2x
17.5x
-8.2%
-5.9%
19.1%
21.3x
22.6x
19.0x
AVERAGE
Benihana National Class A Ord Shs
BNHNA
$0.84
$0.79
$0.94
Source: Company reports and Morgan Joseph & Co. Inc. estimates
Note: Estimates for NR Companies are based on First Call Consensus estimates.
5
MORGAN JOSEPH & CO. INC.
Benihana, Inc.
August 31, 2007
Required Disclosures
Rating and Price Target History for: Benihana, Inc. (BNHNA) as of 08-30-2007
12/12/05
Buy:$26
02/03/06
Buy:$28
05/18/06
Hold:NA
05/31/06
Buy:$40
08/24/06
Buy:$30
10/17/06
Buy:$32
11/03/06
Buy:$38
11/20/06
Buy:$33
01/09/07
Buy:$36
06/14/07
Buy:$24
06/18/07
Buy:$27
25
20
15
10
5
Q3
Q1
Q2
2005
Q3
Q1
Q2
2006
Q3
Q1
Q2
0
2007
Created by BlueMatrix
Price Target
Our price target is $23.
Valuation Methodology
Our revised price target of $23 reflects an EV/EBITDA multiple reduction from 10x to 9x, to better reflect the recent disappointment in
EPS and market reductions in overall valuations.
Risk Factors
Benihana is influenced by the general environmental, economic, and competitive conditions in its markets.
■
■
Benihana depends on special holidays, such as Mother's Day, Valentine's Day, and New Year's for incremental business.
■
The company operates in the intensely competitive restaurant industry against significantly larger and better financed competition.
■
Benihana is subject to licensing and regulation at the State and local levels in order to operate its business.
■
The company is subject to "dram shop" statutes in most states and may be held liable for wrongly serving alcoholic beverages.
■
Benihana is subject to liability for the food served and the risks associated with mad cow disease and the Avian flu.
■
Swings in commodity costs can impact Benihana's cost, menu prices, and customer traffic.
I, Dean Haskell, the author of this research report, certify that the views expressed in this report accurately reflect my personal views
about the subject securities and issuers, and no part of my compensation was, is, or will be directly or indirectly tied to the specific
recommendations or views contained in this research report.
I, Julia Heckman, the author of this research report, certify that the views expressed in this report accurately reflect my personal views
about the subject securities and issuers, and no part of my compensation was, is, or will be directly or indirectly tied to the specific
recommendations or views contained in this research report.
Research analyst compensation is dependent, in part, upon investment banking revenues received by Morgan Joseph & Co. Inc.
Morgan Joseph & Co. Inc. intends to seek or expects to receive compensation for investment banking services from the subject
company within the next three months.
Morgan Joseph & Co. Inc. makes a market in the shares of BNHNA.
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MORGAN JOSEPH & CO. INC.
Benihana, Inc.
August 31, 2007
Investment Banking
Services/Past 12 Mos.
Rating
Percent
Percent
BUY [B]
67.33
32.35
HOLD [H]
30.69
9.68
SELL [S]
1.98
0.00
Meaning of Ratings
A) Buy means reasonable outperformance relative to the market over 12-18 months.
B) Hold means market-type risk adjusted performance; potential source of funds.
C) Sell means expected to underperform the market.
Other Disclosures
The information contained herein is based upon sources believed to be reliable but is not guaranteed by us and is not considered to be
all inclusive. It is not to be construed as an offer or the solicitation of an offer to sell or buy the securities mentioned herein. Morgan
Joseph & Co. Inc., its affiliates, shareholders, officers, staff, and/or members of their families, may have a position in the securities
mentioned herein, and, before or after your receipt of this report, may make or recommend purchases and/or sales for their own
accounts or for the accounts of other customers of the Firm from time to time in the open market or otherwise. Opinions expressed are
our present opinions only and are subject to change without notice. Morgan Joseph & Co. Inc. is under no obligation to provide updates
to the opinions or information provided herein. Additional information is available upon request.
© Copyright 2007 by Morgan Joseph & Co. Inc.
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MORGAN JOSEPH & CO. INC.