Hooters Goes Global

11/07/2013 10:00 am EST


Hooters are casual restaurants with sports on TV, jukeboxes, and the "world famous" Hooters Girls, notes small-cap stock specialist Konrad Kuhn in The KonLin Letter.

Chanticleer Holdings (HOTR), a franchisee of international Hooters restaurants, has exploded through its upside target prices; however, in our view, the stock has a long way to go, as it expands its restaurants abroad, and in the US.

The company currently owns, in whole or in part, the exclusive franchise rights to develop and operate Hooters restaurants in South Africa, Hungary, and Brazil.

It also has joint ventured with the current Hooters franchisee in Australia, while evaluating several additional international opportunities.

HOTR also signed a binding letter of intent to acquire an existing Hooters location in Nottigham, England; management expects further expansion in the UK market.

HOTR is progressing with an additional Australian restaurant, and recently signed a lease for a Pretoria, South Africa location.

It is also planning for a restaurant in Rio de Janiero, which, if successful, would bring the company to its goal of ten Hooters restaurants by year-end. With the FIFA World Cup coming to Brazil in 2014, and the Olympics in 2016, we see a tremendous opportunity.

The company also has a minority interest in the privately-held Hooters of America (HOA), the operator and franchisor of over 430 Hooters restaurants; HOTR's CEO Mike Pruitt is a member of the HOA Board of Directors.

HOTR also recently acquired American Roadside Burgers, a fast, casual burger chain with five existing restaurants.

Management's key strategic initiatives are coming to fruition as planned; the company is gaining momentum and growing stronger. Meanwhile, the stock surged through our first target of $4 to $4.50 for a 143% gain.

Our next revised target is in the $6 to $7 area, although the stock must close above $5 first. Our ultimate price target is a move to $10 or $11.

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