BTIG On Restaurants: 'Cash Is King'
Restaurant operators of all sizes are being impacted by the coronavirus and investors looking for exposure should follow the concept that "cash is king," according to BTIG.
Dunkin Has Cash
Dunkin is "flush with cash" with more than $375 million on hand which represents more than seven months of franchise fees and royalty revenue, Saleh said. The cash is also the equivalent of three times the annual dividend payment.
The company has sufficient cash to cover a full-year of G&A and interest expense before it needs to tap additional sources of capital, the analyst wrote in a note. In addition, operators could be forced to increase leverage to help their franchisees and Dunkin certainly has "an ample cushion."
Texas Roadhouse Has No Debt
Texas Roadhouse's 50% decline over the past few weeks should be put in perspective, Saleh said. The company has zero debt, more than $100 million in cash and owns close to $500 million worth of land.
The casual sit-down chain should be considered the "safest investment in casual dining right now" given its cash position, the analyst wrote. As such, the chain should be able to "recover faster than others."
DNKN and TXRH Price Action
Shares of Dunkin traded lower by 7.7% to $44.28.
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