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Deer Horn Capital ntg lux

QSR.UN at $2.35 has a 25.5% return on investment paid monthly

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By In4anickel

Posted: Monday Oct 27 8:56:15AM 2008

This company owns approximately 460 outlets which consist of KFC Kentucky Fried Chicken, Taco Bell and Pizza Hut. One week ago for a brief moment it was yielding 48%. This year they plan distribue $0.90 per unit and their payout ratio should be 95%. They have cut their payouts so that next year they will payout only $0.60 per unit, which will drop their payout ratio to a very sustainable 63% if all things remained the same. If we plunge into a deep recession people may very well cut back spending, but usually high end restaurants get hit first with sales accruing to the lower price restaurants. With the company retaining the extra cash from the lower payout ratio they will re-invest it into multi branding of stores, an increasingly diversified menu i.e. that is grilled chicken and chicken wraps, lastly they will be buying back more units on the market. Since the end of the third quarter 2008 they have reported buying some 143,400 units at an average price of $2.22 as part of their normal course issuer bid. There are restrictions on their ncib to some ~10,700 units per day. So their purchases have been near the maximum possible. At these levels and the share buyback in place there is very little risk and you receive good compensation while you wait for a turn around in the market. I have loaded up the bucket on this one. In 4

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