Wagamama Memo 300620
- Understand why Wagamama is, in our view, the best positioned UK casual dining operator to navigate the post-COVID re-opening
- Understand what it takes to break Wagamama’s liquidity and net leverage trajectory to the point where a refinancing of its £ 4.125% 7/2022 Senior Secured Notes (SSNs) becomes difficult
- Understand how, pre-COVID-19, Wagamama was earning a 10 year unleveraged IRR of 19% on its new restaurants and generating steady state (leveraged) FCF of c. 7-19% of net debt each year in most years
- Understand the likely phasing of Wagamama’s restaurant re-openings for dine-in and the impact of social distancing on Wagamama’s likely seating capacity vs pre-COVID-19
- Understand flexibility in Wagamama’s cost base and potential to renegotiate rent lower
- Detailed financial projections (including of liquidity by quarter) and assumptions across base, bear and bull cases
- Steady state FCF methodological framework and estimation
- Estimation of new restaurant IRRs
- Why do Wagamama’s liquidity, net leverage and valuation trajectories suggest it should be able to refinance in our base case?
- How would Wagamama’s prospects of refinancing look if social distancing and seating capacity constraints persist deep into FY 21?
- How is Wagamama competitively positioned within UK casual dining on re-opening of restaurants?
- Which is likely the bigger constraint for Wagamama on re-opening – its seating capacity constraint or demand to dine-in?
- Should SSNs holders be worried about priming potential if Wagamama does need additional liquidity?
- Should SSNs holders be worried about restricted payments to The Restaurant Group Plc?
- View, Variant Perception & Recommendation
- Business Overview & Analysis
- Historic Financial Analysis & Performance Comparison vs Peers
- Seasonality & Working Capital
- Working Capital Analysis
- Financial Model – Projections, Valuation & Sensitivity
- Group Structure & Indenture Review
The Restaurant Group