E Why Chanticleer Holdings Could Rise 150% Within Weeks

  • Chanticleer is an exclusive owner of the very valuable Hooters brand and other high potential restaurant chains
  • Chanticleer is growing >100% annually
  • Chanticleer is dramatically undervalued compared to peers
  • Small restaurant stocks have the potential to soar tremendously
  • Multi-year low share price provides excellent entry point

I recently initiated a long position in Chanticleer Holdings (HOTR), an undiscovered holding company that is exclusively invested in fast-growing and high potential restaurant chains like the iconic Hooters brand.

Picture this: This NASDAQ stock is growing exponantially, will have an annual revenue of $36 million based on latest quarter, is on the verge of profitability, yet it's current valuation is just $15 million? Yes it is. Welcome to Wall Street. Even though the stock market is nowadays considered to be fully valued, there are always ridiculously mis-priced small cap stocks to be found providing you a great opportunity to make money.

About the company

Chanticleer Holdings was founded in 1999 and owns and operates Hooters franchises in the United States and internationally. It also holds exclusive franchise and development rights in various locations in South Africa, Brazil, Australia, and Europe. In addition, the company owns and operates American Roadside Burgers that focuses on American food menu offerings; Just Fresh, a casual dining concept; and Spoon Bar & Kitchen, a fine dining seafood restaurant in Dallas, Texas. Management is rolling out a rapid growth strategy of expanding these brands in US and emerging markets through franchising, partnerships and/or acquisitions of highly experienced operators with aligned interests.  Based on this year quarter-to-quarter growth in revenue, Chanticleer appears to be exactly on the right track.

Chanticleer is growing massively

The financial statements clearly show how fast Chanticleer is already growing. Check out the most recent revenue numbers:

Q3 2013: $1.6 million

Q4 2013: $3.3 million

Q1 2014: $5.8 million

Q2 2014: $6.9 million

Q3 2014: $9.0 million

And the increase in restaurant holdings:

2011: 3

2012: 6

2013: 18

2014: 26

Chanticleer's major expansion strategy

Chanticleer has 4 different fast-growing chains/brands in its portfolio:

Number 1: Hooters

Hooters is a world famous brand, and has especially great potential in the emerging markets. What’s more, it’s still growing in mature markets, so you can imagine what the possibilities are in say South Africa, India, Brazil and other nations.

Chanticleer has an equity stake in the privately held group, Hooters of America. Let me reiterate the interesting part: Chanticleer owns the exclusive rights to commercialize Hooters in South Africa, Hungary, United Kingdom, and parts of Brazil. The company also has a majority stake in Hooters Australia. So besides a direct equity stake, Chanticleer is also a franchisee of domestic and international Hooters locations. Currently the company has opened locations in South Africa, Australia and Brazil. A Hooters joint draws in approximately $2 million in annual revenue, and management expects the territories to have a market opportunity of at least 75 restaurants, equating to $150 million in annual revenue potential (Chanticleer's total current trailing annual revenue is $17 million). The upside is very large.

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Disclosure: The author is long HOTR.

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Sujan Lahiri 7 years ago Author's comment

The Q3 earnings reveals why the share price didnt jump on the volume spike. Apparently, warrants at high strike prices got re-priced at $2, and about 180k were converted. That explains.

Further, revenue was even higher than expected. Also, the debt repayments are postponed to 2015, that's positive. Key thing now is that they need to report a profit within 6 months.

Danny Straus 7 years ago Member's comment

I really enjoyed this article and did buy HOTR based on it. But the 150% increase failed to materialize... in fact the stock went down. So my question for Mr. Lahiri is, do you have an update to this article? Do you still feel the stock will increase, but needs more time?

Sujan Lahiri 7 years ago Author's comment

Despite a 15X volume, share price stayed flat. Apparently, a big seller got out, but I don't know who that might be. I asked the CEO, he didn't know it either. So that delayed the increase, and yes I believe it just needs some more time. Earnings are on 14th, and I'm holding. Thank you for the feedback.

Danny Straus 7 years ago Member's comment

Thanks, would love to read a follow up by you some time soon. Though I'm disappointed, I think your initial analysis still holds true and I haven't given up hope that we'll see a marked increase soon.

Micro Blogger 7 years ago Member's comment

After doing a bit more research, this sounds like a sweet investment idea! My thanks to the author. I'm following you know.

Frank J. Williams 7 years ago Member's comment

This is an intriguing investment idea, but I don't want to get caught up in the hype or tempted by something too good to be true. How can anyone ever claim a stock will likely increase by 150%. A bit sensationalist now? I'd like a bit more convincing. I'll keep an eye on the stock and if I'm wrong... well it's always better to be safe than sorry.

Joe Black 7 years ago Member's comment

The question is, at the current price, can you risk not investing? There is always a chance the price will go down, but the stock is at a such a low price now... there is far more upside than down. You can certainly afford at least a minor investment. Diversification is key.

Joe Black 7 years ago Member's comment

Yes there's some risk here, but the upside is huge. The stock did do over 100% between September and October of this year. And I think it will go even higher.

Robert Capasso 7 years ago Member's comment

Mr. Lahiri, I appreciate your time in sharing your analysis. But I have serious concerns about this stock and would like better understand how you can make such a recommendation.

Do you think it makes sense to buy a company because it claims to be growing exponentially when:

1) it has essentially no cash and lots of the debt

2) no earnings, only losses

3) it does not have enough money to fund the next year, so will need more money

4) management has already been sued for failing to make SEC disclosure requirements and for stating that results were audited when they were not

So how does this sound like a good investment to you? Can you please address my concerns?

Sujan Lahiri 7 years ago Author's comment

Thank you for reading my analysis. The growth in revenue stems for the SEC filings. They are executing an aggressive growth strategy, in which they can switch to profitability any time now. It's about the economies of scale in the restaurant business. They have a line of credit, and the CEO is heavily invested himself. The key is that they now need to make sure they keep growing while generating a net cash inflow. It will be a home-run if they do. It's all about the risk vs. reward at the end.

Robert Capasso 7 years ago Member's comment

Thanks for taking the time to reply.

Clark Winslow 7 years ago Member's comment

It looks like a penny stock to me. Management has been involved in a lawsuit for failure to disclose lack of auditing of it's financial results in S. Africa (yes, they settled, but that the fact that there even was a lawsuit is troubling).

Also the key stats look terrible: finance.yahoo.com/q/ks?s=HOTR+Key+Statistics. Why would I want to take this sort of a risk?

Joel Santiago 7 years ago Member's comment

I think Mr. Lahiri has made an excellent case. I'm convinced. Plus I can't find any other analysts on the web saying anything contradictory here. I'm buying.

BreakingbadMarketNews 7 years ago Member's comment

Isn't there a class action lawsuit against this company for unscrupulous business practices? Sounds like a risky investment.

StockTrustTips 7 years ago Member's comment

Nah, that lawsuit is over.

Susan Miller 7 years ago Member's comment

While I'm certainly no fan of Hooters, you make a compelling case for this stock. I will add it to my portfolio.