Tuesday, February 3, 2015

Good Business, Bad Investment?

Many people think that stocks are just alphanumeric digits that randomly go up and down. They tend to forget that behind every stock is a business.

Anyway, guess who I am talking about?

Clue:

Credits: Me

SHAKE SHACK!!

When I stayed in Brooklyn for 2 weeks, I think I ate Shack Shake like 4 times. I would have eaten it more if I had the chance, but the queues and select locations didn't make it possible for me to enjoy those mouthfuls of heaven.

They have a few locations around Manhattan, they have long queues (think llao llao kind of queues) and the best part of all?

They are bloody freaking delicious.

In my life, I've eaten a lot of burgers. I have to say that this burger flat out is mindblowingly delicious. Without a doubt, the best burger I've ever had. It's not even expensively priced at all. It's kind of at the Carl's Jr range of fast food pricing.

I dream about these burgers, and even now as I type, my mouth goes dry and I feel like licking my screen.

For those curious, Omakase Burger is the closest thing to it that can be found in Singapore. However, they cost twice as much and don't taste nearly as good as Shake Shack. The problem isn't Omakase Burger, the problem is that Shake Shack set the bar too damn high!

This IPO is good news for me. I hope and pray that we see a Shake Shack in Singapore soon. Oh gawd.


But alas, as good as it is as a business, I think it is going to make a horrible investment at this price.

Priced at $49, Shake Shack (SHAK) opened trading at about 108 EV/EBITDA. However, it did close at about 100 EV/EBITDA. But still.... what?

No shit.

For some perspective, McDonald trades at 11, Starbucks trades at 15 and Yum Brands (KFC, Pizza Hut, Taco Bell) trades at 12.

Unless that burger cures cancer and stops global warming, I don't see in what reality can a faster food joint be worth 108 EV/EBITDA.

Madness, pure madness.

5 comments:

  1. Hi GMGH,

    Yeah I tried it in Istanbul and it was so good I went back for a second time. I think it's more expensive than Carls' Jr as the burger is smaller and I always have the milkshake too. Their system is quite organized and neat but I won't be investing in such IPO. Anyway, with money from IPO, hope they come to Asia, or In N Out Burger will do. For now, you can go De Burg, Fat Boy or Little Diner to satisfy your cravings :)

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    1. Hey Jes,

      Haha, it's nigh impossible to only have one and not dream about having it again!

      I've tried Fatboys and De Burg before, good but not completely filling that satisfaction that I know the ultimate burger can give me! Thanks for the rec, I'll definitely give Little Diner a try one of these days!

      In N Out is pretty darn amazing too, I must say! I hope either of them come to Singapore!

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  2. My sentiments exactly, I ate Shake Shack at 4 different outlets at Manhattan in 2 weeks. At one time I braved a 2km walk in cold strong wind to get there, half frozen but it was worth it when I sunk my teeth into the burger.. just magical. And the very first time I ate it I actually had to do a take-away as it was drizzling and the outlet was not sheltered. I then had to brisk walk back to my hotel about 3 blocks away in the freezing weather and eat it in my tiny hotel room. But it was magic again. Then I came back to Singapore and back to reality.

    Yes Omakase invokes memories of Shake Shack, but only to cruelly remind us of how it still falls short. I mean it does come closest to having the taste of Shake Shack, but somehow perhaps because of its price or something every meal I've had at Omakase is somewhat consistently unsatisfying. I would say Fatboys is actually quite satisfying, while they don't have the level of tastiness Omakase can boast of, their portions can be very large.

    I'm not sure if you tried Five Guys as well when you were in NYC? In my view they come pretty close to Shake Shack as well. I've even google for "Shake Shack franchise" and "Five Guys franchise" to see if it's possible for someone to bring them over to Singapore one day but the official word on their websites is that they are not looking to franchise further internationally....

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    1. RetailTrader,

      We've had such similar experiences!

      In fact, I did have Five guys! It was a pretty good experience for me. I ordered a Cheeseburger, and they gave me a Double Cheeseburger instead, OH YEAH! But alas, as good as they are, SS still takes the crown for best burger ever!

      I think Five Guys and Fatboys are actually pretty similar style-wise (and portion-wise), they have the very nice home-made feeling to them. Whereas Omakase and SS has a more franchised, standardized, cookie-cutter sort of feeling.

      Taste is so subjective, but I think they must be doing something right if so many people can swear by them!

      If I could get the franchisee license for Singapore, oh man I would love to run that business!

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  3. When I went the service at Five Guys was very bad. I asked if they have any burgers that don't contain beef becos my wife doesn't eat and the staff stared at me like I was crazy. But I forgave them after I started eating heh

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