Rick’s Cabaret International, Inc.

Rick’s Cabaret International, Inc. was founded in 1982 and is based in Houston, Texas. The company operates night clubs under the names Rick’s Cabaret and XTC which offers adult entertainment, restaurants, bar operations in Houston, Austin, San Antonio, and Minneapolis. The Company‘s upscale nightclubs serve primarily businessmen and professionals that offer live entertainment, dining and bar operations. The company would therefore likely be considered a ‘Vice company.’

Rick's Cabaret

Stock Snapshot

The stock for Rick’s Cabaret Int’l, Inc (NASDAQ:RICK), closed at USD 8.0 as at Oct  4’ 2012. The stock has a total market capitalization of USD 77.4  million and a P/E ratio of 9.64, a P/B ratio of 0.95 and  a P/S ratio of 0.86. The average volume witnessed by the stock over the last three months is 22,561 shares.

Competitor Snapshot

Greene King plc (LON:GNK), through its subsidiaries, operates as a pub retailer and brewer in the United Kingdom. Greene King plc (LON:GNK) operates pubs, restaurants, and hotels; and tenanted and leased pubs in England. As of Oct 5 ‘2012, the stock traded at GBP 625 with P/E ratio of 1,315, a P/S ratio of 117 and a P/B ratio of 141.65.

 

Financial Analysis

Top line

For 9MFY12,  Rick’s Cabaret Int’l, Inc (NASDAQ:RICK) registered total revenue of USD 71.3 million as compared to USD 62 million for the corresponding period last year; representing YoY increase of 15.01%. For 9M FY12, 44.5% of the revenues related to services and 40.6% of the revenue related to sales of alcoholic beverages. For 9MFY11, 46.1% of the revenues related to services and 39.1% of the revenue related to sales of alcoholic beverages. During 9MFY12, the revenue increased mainly from 19.4% increase in revenue from sales of alcoholic beverages and 10.8% increase in service revenues. The increase in total revenues was primarily attributable to clubs acquired during last fiscal year. In addition strong results from the Rick’s Cabaret Int’l, Inc (NASDAQ:RICK)’s locations at DFW Airport and Austin, Onyx locations in Philadelphia and Charlotte and XTC Dallas also played a major role in increasing the revenues.

Results:

For 9MFY12, the company reported basic earnings per share of USD 0.63 as compared to USD 0.59 per share for 9MFY11. For 9MFY12, the expenses included one-time costs of USD 200,000 settlement of a lawsuit and very high legal expenses; an asset sale of 32,000 was also included which impaired the overall results.

Financial Position

As of 30 June 2012, the company had USD 10.69 million in cash balances representing a cash value per share of USD 1.11. The book value per share stood at USD 8.62 as of 30th June 2012 whereas a debt to equity ratio of 50.3 was recorded.

Factors to Watch out For!

The stock appears to have strong growth prospects for value investors based on the following factors:

  • The Company’s subsidiaries have successfully completed the acquisitions of nine gentlemen’s clubs in Texas and Arizona. Deal closing on the remaining two clubs in the 11-venue transaction is expected to take place soon after legal permissions have been obtained!
  • Strong YoY sales growth!