UPDATE: Wunderlich Initiates Coverage On Kona Grill

In a report released Monday, Wunderlich analyst Robert M. Derrington initiates coverage on Kona Grill KONA with a Buy rating, and a 12 to 18 month price target of $28.00 per share.

Credit Suisse analysts favor Kona Grills average unit sales, store-level returns, and significant development potential, claiming the company presents aggressive growth opportunity.

Derrington states the “polished casual” restaurant has a strong average unit sales and projects the company to double adjusted EBITDA and sales within the next five years.

Kona Grill has impressively reported positive same-store sales for 14 of the past 15 quarters. In May, Kona reported a same-store sales increased of 6.2 percent for its first quarter, passing its sectors sales trends by over eight percent.

The company last reported an average cash flow margins of 18 to 19 percent on net cash investment of $2.5 million, sales to cash investment is projected at 1.7x multiple and a cash return on cash investment between 31 to 33 percent.

Kona's management announced guidance to expand from its current 23 locations, projecting to open five locations in 2014, six to seven in 2015 and seven to eight in 2016, adding to its projection of doubling its revenue and unit base within the next five years. Management added to its projections with guidance of same-store sales growth of two to three percent and revenue increases of 18 percent in 2014, 24 percent in 2015 and 24 percent in 2016.