Kona to Boost Investors' Wealth - Analyst Blog
After swinging back to profit in the third quarter of 2011, Kona Grill Inc (KONA) is set to boost investors' wealth by initiating a share buyback program.
The board of directors of Kona, the owner and operator of upscale casual dining restaurants in the United States, has approved a new share repurchase program of up to $5 million. The repurchase will be executed from time to time in the open market as well as in privately-negotiated transactions based on market conditions, stock price and other factors.
We appreciate Kona's effort to bolster long-term shareholder value and believe that the new share repurchase authorization affirms the company's optimistic outlook and reflects strong growth potential going forward.
The recent acceleration in its business has enabled Kona to accumulate enough cash balance to carry out the share buyback program. As of September 30, 2011, the company had cash and cash equivalents of $5.8 million and shares outstanding of about 9.5 million.
One of its competitors Yum! Brands Inc. ( YUM ) also recently authorized a stock repurchase program of an additional $750 million. The company remains committed to enhancing shareholder value and return cash to shareholders through share repurchases or dividends.
The Scottsdale, Arizona-based company also announced that Mark S. Robinow has stepped down from his position as the Chief Financial Officer (CFO), Executive Vice President and Secretary of the company.
In the recently concluded third quarter of 2011, Kona reported adjusted earnings of 8 cents per share, which beat the Zacks Consensus Estimate by 2 cents. Total restaurant sales in the quarter rose 15.9% year over year to $23.8 million, on the back of a 10.6% increase in same-store sales. Restaurant operating profit margin expanded 420 basis points (bps) to 18.3% in the reported quarter attributable to cost containment efforts.
For the fourth quarter of 2011, the company expects total restaurant sales to remain in the $21.5-$22.3 million range and same-store sales to increase 4%. However, Kona expects net income per share to range between a loss of 1 cent to 2 cents a share.To drive traffic and improve earnings, KONA embarked upon several strategies like offloading unprofitable locations, restaurant remodeling, unit expansion and promotions in a bid to create awareness.
Kona currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.