SHAKEYS PIZZA ASIA VENTURES, INC. (PSE: PIZZA) COMPANY PRESENTATION - - PowerPoint PPT Presentation

SHAKEY’S PIZZA ASIA VENTURES, INC.

(PSE: PIZZA)

COMPANY PRESENTATION

AUGUST 2018

Company Overview

2 SNAPSHOT

• Shakey’s Pizza Asia Ventures, Inc. is the Philippines’ #1 full-service pizza chain with over

60% market share in that category. It is also the single-largest brand of full-service casual dining chain restaurants in the Philippines.*

• A strong and well-established brand thanks to a differentiated menu, iconic and well-loved

products, a distinct store environment, and highly guest-centric service

• Apart from the Philippines, also owns the Shakey’s trademark in perpetuity for the Middle

East, Asia (excluding Japan and Malaysia), China, Australia, and New Zealand. It does not pay any royalties and is instead able to collect from local and international franchisees.

• The Company listed on the Philippine Stock Exchange in 2016 under the trading symbol
• PIZZA. It currently has a market capitalization of c.USD0.4 billion.
• Store Network: 200+ stores across the Philippines – a mix of company-owned and
• franchised. Different store formats including those located in malls and those that are free

standing.

• Key Management: Vicente Gregorio - President & CEO, Manuel del Barrio – VP & CFO,

Jorge Concepcion, Shakey’s Philippines GM, Alois Brielbeck, In-House Commissary GM

*Source: Euromonitor, 2017

Revenues (In USD Mill) 93 98 113 131

148

2014 2015 2016 2017 2018* 8 9 13 14

16

2014 2015 2016** 2017 2018*

**Based on recurring net income *Consensus of active brokers

Net Income (In USD Mill)

Century Pacific Group 53% GIC Private Equity 18% Public 29% Dine-In 61% Delivery & Others 39% Company- Owned 59% Franchised 41% Metro Manila 46% Luzon (ex-MM) 41% Visayas 9% Mindanao 4%

FULL-YEAR FINANCIALS 2017 SYSTEM-WIDE SALES & STORE NETWORK BREAKDOWN OWNERSHIP STRUCTURE

The Overall Scenario

Well-positioned to take advantage of the growing foodservice industry

3 9.03 9.52 10.05 10.77 11.52 12.1 2011 2012 2013 2014 2015 2016

4 F’s in the consumer economy to benefit from strong economic growth

20%

• f a typical middle-income household

budget goes to food consumed

• utside home. This totals more than PHP500 billion

annually, showing a strong propensity to spend.

Source: NSO, Nielsen, Euromonitor, BSP

Furnishings Fashion Food Fun

Restaurants and hotels are growing household consumption sectors The consumer foodservice industry has been growing in recent years

In USD Billions

Full-service pizza chain restaurants show faster growth than the whole full-service restaurant sector

16% vs 5%

CAGR from 2012-2017

Shakey’s has 42 years of strong brand legacy and counting

4

First store in the Philippines

1987

The Prieto family became the master franchisor in the Philippines Acquired Shakey’s trademark for the Philippines in perpetuity Acquired Shakey’s trademark for Middle East, Asia (ex Japan, Malaysia) including China, Australia, and New Zealand in perpetuity First Shakey’s Pizza Parlor opened in Sacramento, California

1999 1999

208

stores by end 2017

2003 2003

Positioned as an American fast casual dining restaurant for families Century Pacific Group (CPGI) and Arran (GIC) acquired control

INVESTMENT HIGHLIGHTS

*Source: Euromonitor, 2017

Summary of Investment Highlights

• Multiple sales channels and store formats; simple operations
• Low upfront cost and strong cash generation lead to shorter store-level

payback periods compared to the industry

• Extensive track records in food and restaurant operations
• Entry of Century Pacific Group as strong and committed shareholders

provides synergies with other food businesses

• Well-loved brand with more than 40 years of history in the Philippines
• Iconic products served in a distinct store environment
• No royalty payments, plus additional revenues from franchisings
• Superior profitability and margins versus peers
• Gearing levels improved post-prepayment of debt care of IPO proceeds
• Cash generative with a negative cash conversion cycle

Market Leadership

1 2

Brand Strength & Ownership

3

Scalable Business Model

4

Experienced Management

5

Industry-Leading Financials

• Dominates the full-service pizza chain market with 65%* market share
• 26%* market share in the full-service (pizza and non-pizza) category - #1 in

that space as well

6

7

#1 Full-Service Restaurant in the Philippines

The full-service pizza chain market is dominated by Shakey’s.

Max's 16.4% Pizza Hut 11.8% Kenny Rogers 6.9% Pancake House 5.1% TGI Friday's 2.8% Others 30.7%

26.3%

Full-Service Chain

Latest Euromonitor report states that Shakey’s leads the Philippine chained full-service restaurant industry with 26.3% market share as of 2017.

Pizza Hut 29.0% Papa John's 2.0% Others 4.4%

64.6%

Full-Service Pizza Chain

2017 data shows that Shakey’s dominates the full-service pizza chain market by sales since 2011 until present.

Source: Euromonitor

8

Strong and Well-Established Brand

Shakey’s offers a differentiated menu with iconic and well-loved products. Differentiated menu with iconic products and offerings for all

Pizza World-famous thin crust and hand-tossed pizzas with many different choices Chicken and Mojos Signature dish - fried chicken paired with Shakey’s famous mojos*

*Thinly-sliced potatoes coated with Shakey’s breading and fried to a golden brown perfection

Pasta Hearty pasta with a wide range of sauces and toppings paired with garlic bread Starters Ranging from fries, mojos, squid rings, chips, and chicken Soup Home-style soups loaded with flavor and goodness Salad Extensive choice of salad for health-conscious customers Desserts Wide range of after-meal desserts

Bundled offerings catering to families and groups bring up average checks

9

Strong and Well-Established Brand

Shakey’s offers a beautiful and distinct store environment to every customer and has full control and ownership of its brand. Though originally from the U.S., PIZZA has

• wned the Shakey’s brand for the Philippines

since 1999. With its over 40 year history in the Philippines, Shakey’s is one of the most recognizable brands in the local food service industry.

Source: Asia’s Top 1000 Brands Survey by Campaign Asia, in partnership with Nielsen

Brand ownership means:

• No royalty payments, leading to shorter payback period

and sustainably higher margins versus peers

• Revenue from licensing fees and royalties from

franchisees

• Freedom to execute and react faster to market changes
• Opportunity for expansion into international markets

2018 Philippine Top 100 Restaurant Brands: 1 2 3

10 10

Proven and Scalable Business Model

Multiple sales channels and store formats provide convenience and accessibility to Shakey’s customers and allow for market and expansion flexibility.

Dine-In

• Most popular sales channel due to

unique family and friends experience

• Aim to “WOW” the guest

Delivery

• Delivery available nationwide
• Single delivery hotline number

(#77-777) can be used Carryout

• Convenient and fast method of sales

Functions

• Free standing stores have function

rooms for events such as parties and company gatherings Online Sales

• Active online and mobile presence

with own website and mobile app

• http://www.shakeyspizza.ph

SuperCard

• A very popular paid loyalty card
• PHP499 annual fee

Mall Stores 120 – 250 sqm

52%

Free Standing Stores 300 – 400 sqm

43%

Others 120 – 180 sqm

5%

11 11

Proven and Scalable Business Model

Shakey’s is a well-established brand, while operating on an asset-light model.

Brand Positioning Short Payback Period Asset-Light Approach Vertical Integration

• Benefitting from key consumer trends – eating out more and

upgrading from fast food to casual dining

• Firmly positioned in the fast casual segment (A, B, and upper C

market) that delivers high margins, good volumes, and scale

• Own commissary for proprietary raw materials

protects key supply chain and maintains consistency and control over quality

• Economies of scale and purchasing synergy
• Long-term leases for store locations at attractive

rentals

• Presence of standalone stores (i.e. those
• utside malls) lead to low rent-to-sales ratio
• Business model and strong discipline leads to typical payback

period of 3-4 years

• Low upfront cost and strong cash generation per store

12 12

Experienced Management Team

VISION: to be the PREFERRED and DOMINANT full-service pizza chain restaurant

Vicente Gregorio

President & Chief Executive Officer

• Over 30 years of successful experience in the food business
• Started career in the first ever Shakey’s branch in the Philippines
• Key driver of Shakey’s brand strategy, organization culture, core values, and mission since 2003
• Proven management and leadership track record in foodservice retail set-up, expansion, and turnaround management

Manuel Del Barrio

Vice President & Chief Financial Officer

• Previously Assistant Vice President for

Finance of Century Pacific Food, Inc. (CNPF) and The Pacific Meat Company, Inc.

• Worked in accounting positions at several

leading companies

Jorge Concepcion

Shakey’s Philippines General Manager

• Over 30 years of experience in consumer-

related business

• Significant experience in the U.S.

foodservice industry for about 10 years in numerous managerial positions

Alois Brielbeck

In-House Commissary General Manager

• Over 30 years of experience in the foodservice

business

• Moved to Asia in 1986, taking up positions in

pastry kitchens in Hong Kong and Tokyo

• Moved to the Philippines in 2000 as Chief

Operating Officer for Culinary Systems Specialists Incorporated

• Appointed as Commissary General Manager in

2005

Joseph Remsa

International Development Consultant

• Previously President and CEO of Shakey’s U.S.A.
• Leads the development and operations of the

Shakey’s brands in Asia, Middle East, Australia, and New Zealand

• Over 25 years of experience in leading
• perations and franchising in top-chained

restaurants

1H 2018 FINANCIAL HIGLIGHTS

Financial Results Highlights

2Q 1H

+16% +13% +7% +7% +9% +5%

• 50bps
• 30bps

14 14

1H 2018 Summarized P&L

• System-wide sales growth

improves to 16% as SSSG RECOVERS TO +9% in 2Q18

• New store opening targets

WELL ON TRACK with 9 new stores in 1H18

• EFFICIENCY IMPROVEMENTS

and PRUDENT TAX MANAGEMENT cushion drop in net margins

In PHP Mill 1H 2017 1H 2018 Change YoY System-wide Sales 4,062 4,597 13% Total Revenue 3,377 3,690 9% Cost of Sales (2,362) (2,631) 11% Gross Profit 1,016 1,059 4% Operating Expenses (421) (470) 12% EBITDA 676 725 7% EBIT 587 602 3% Income before Tax 502 511 2% Net Income 371 396 7% Earnings per Share 0.24 0.26 7% Margins Gross Profit 30.1% 28.7%

• 1.4 pps

EBITDA 20.0% 19.6%

• 0.4 pps

EBIT 17.4% 16.3%

• 1.1 pps

Net Income 11.0% 10.7%

• 0.3 pps
• PERSISTENT COST PRESSURE

in 2Q18, but margins still above industry average

• Inflationary pressures and peso

depreciation PARTIALLY OFFSET BY PRICE ADJUSTMENTS

15 15

4% 5% 2%

9%

FY16 FY17 1Q18 2Q18

Same-Store Sales Recovers in 2Q18

SSSG

• RECOVERY driven by brand

initiatives to increase traffic:

• 1. Product innovations
• 2. Marketing and promotions

(in-store and delivery)

• 3. Balanced and reasonable

price adjustments

• PRICE INCREASE in latter part
• f 1Q18

8%

5% 3 - 5%

1H17 1H18 FY18 Target

16 16

+4 +5 +11

Target for Balance of Year

Store Network Expansion Remains On Track

4,062

4,597

2,054

2,388

1H17 1H18 2Q17 2Q18 In PHP Mill Historical Store Network Count in the Philippines System-wide Sales

• Store network expansion aligned with strategy to BRING THE SHAKEY'S

EXPERIENCE BEYOND TYPICAL LOCATIONS

• Successful store opening and accelerated SSSG brings 1H18 SYSTEM-WIDE SALES

GROWTH TO +13% +9 +20 +13% +16%

184 208 212 217 228 As of Dec 2016 As of Dec 2017 As of Mar 2018 As of Jun 2018 As of Dec 2018F

17 17

BY GEOGRAPHIC DISTRIBUTION

46%

NCR

41%

Luzon ex-NCR

9%

Visayas

4%

Mindanao

*Map colors show % population of the country by region. The darker the color, the higher the % population. Source: Philippine Statistics Authority 2015

BY OWNERSHIP

42%

Franchised

58%

Company-Owned

• Strong brand equity and scalability provide

HIGH GROWTH OPPORTUNITIES outside NCR where there is underpenetration and environment is less competitive

• PARTNERING WITH STRONG LOCALS to

run far-flung provincial operations – a proven effective strategy based on historical experience

217

Stores as of End June 2018 Breakdown of Total Store Network as of End 1H18

18 18

Expanding Nationwide Store Network

18 18

• International franchisee Aljeel Capital

committed to open NINE MORE STORES IN THE UAE in the next five years

• Leveraging on the SIZABLE POPULATION of

Filipinos in the Middle East and their familiarity with the Shakey's brand

19 19

Second International Store Located in the Middle East

Shakey’s Opens First Store in Dubai, UAE

19 19

30.3%

28.6%

2Q17 2Q18 30.1%

28.7%

1H17 1H18

• 160

160 bps

• 140

140 bps

Margin Softening Due to Continued Cost Pressures

• SLIGHT DECLINE IN GROSS

MARGIN due to:

• 1. Continued rise in input costs –

particularly CHEESE - since 2H last year

• 2. Peso depreciation
• 3. Inflationary headwinds on
• ther costs including

packaging, transportation, and store overhead

• Gross margin TRENDING FLAT

SEQUENTIALLY, supported by price increase

• Profitability level still within

comfort range and ABOVE PEER AVERAGE

29.5% 28.8%

28.6%

FY17 1Q18 2Q18 Gross Profit Margin

• 70

70 bps

• 20

20 bps 20 20

Maintained Net Margins Despite Inflationary Headwinds

EBITDA Net Income 20 .1% 19 .5%

19.8%

FY17 1Q18 2Q18

• 60

60 bps +3 +30 bps

• 40

40 bps

10.9% 10.4%

11.1%

FY17 1Q18 2Q18

• 50

50 bps +7 +70 bps

• 30

30 bps

• Total OpEx growth

driven by CRITICAL CAPABILITY- BUILDING INITIATIVES:

• 1. Depreciation

from stores

• 2. New HQ and

commissary expenses

• 3. IT systems and

infrastructure

• Nonetheless,

RECENT COST SAVINGS in A&P and overhead

20.0%

19.6%

1H17 1H18 20.4%

19.8%

2Q17 2Q18

• 60

60 bps

11.0%

10.7%

1H17 1H18 11.6%

11.1%

2Q17 2Q18

• 50

50 bps bps 21 21

Balance Sheet

In PHP Mill 2017 1H 2018 Cash 245 239 Receivables 586 565 Other Current Assets 424 594 Total Current Assets 1,255 1,398 Property, Plant, and Equipment 1,538 1,631 Goodwill and Trademarks 6,066 6,066 Other Non-Current Assets 250 248 Total Non-Current Assets 7,854 7,945 TOTAL ASSETS 9,109 9,343 In PHP Mill 2017 1H 2018 Trade Payable and Others 1,065 925 Short-Term Debt 48 48 Total Current Liabilities 1,113 973 Long-Term Debt 3,885 3,860 Other Non-Current Liabilities 137 138 Total Non-Current Liabilities 4,022 3,999 TOTAL LIABILITIES 5,135 4,972 TOTAL EQUITY 3,974 4,370 TOTAL LIABILITIES AND EQUITY 9,109 9,343

• Increase in working capital mainly due to

HIGHER INVENTORY to lock in cheese requirements at favorable prices

• Elevated PPE to support

ORGANIZATIONAL GROWTH and OPERATIONAL CAPABILITIES

• Decline in trade payables versus end

2017 due to SEASONALITY and PROCESS STREAMLINING

• Long-term loan of PHP3.9 billion all

PESO-DENOMINATED WITH FIXED INTEREST RATES

22 22

Ratios

Net Debt-to-Equity (x) Net Gearing (x) Net Debt-to-EBITDA (x) Return on Equity 1.23

1.08

2017 1H 2018 0.93

0.84

2017 1H 2018 3.48

3.25

2017 1H 2018 21%

20%

2017 1H 2018

23 23

Uses trailing 12-month EBITDA (Interest-Bearing Liabilities - Cash) / Total Equity Uses trailing 12-month earnings and average equity (Total Liabilities - Cash) / Total Equity

• COMFORTABLE

GEARING RATIOS despite elevated debt

• Company’s only

interest-bearing debt is the PESO- DENOMINATED ACQUISITION LOAN USED IN THE CHANGE OF MAJORITY SHAREHOLDERS in 2016

• MAINTAINED

ABOVE-INDUSTRY ROE at 20%

Cash Flow

In PHP Mill 1H 2017 1H 2018 Income before Income Tax 502 511 Depreciation and Amortization 89 123 Interest Expense 85 91 Changes in Working Capital (111) (272) Others (147) (109) Net Operating Cash Flow 419 344 Capital Expenditures (413) (216) Redemption of AFS Investments and Others 1,084 (16) Net Investing Cash Flow 671 (232) Proceeds from (Payment of) Loan (1,025) (25) Others (247) (95) Net Financing Cash Flow (1,272) (120) Effect of Exchange Rate Changes 2 Beginning Cash 329 245 Change in Cash (182) (6) Ending Cash 146 239 Free Cash Flow 5 128 24 24

• Higher depreciation due

to STORE NETWORK and HEAD OFFICE AND COMMISSARY EXPANSION

• Increase in working capital

driven by HIGHER RAW MATERIAL INVENTORY and STREAMLINING OF TRADE PAYABLES

• CapEx primarily for NEW

STORE OPENINGS and IT INVESTMENTS

• MAINTAINED POSITIVE

FREE CASH FLOW supports payment of interest and dividends

Cash Conversion Cycle

362

501

27

35

• 10

20 30 40 50 60 70 80 90

• 200

400 600 800 1,000 1,200

FY17 1H18 days

₱ Mns

1,005

867

74

61

• 10

20 30 40 50 60 70 80 90

• 200

400 600 800 1,000 1,200

FY17 1Q18 days

₱ Mns

586

565

31

28

• 10

20 30 40 50 60 70 80 90

• 200

400 600 800 1,000 1,200

FY17 1H18 days

₱ Mns

(57)

199

(16)

2

(60) (40) (20)

• 20

40 60 80 100 120 140 160 180 200 (60) (40) (20)

• 20

40 60 80 100 120 140 160 180 200

FY17 1H18

days ₱ Mns

Working Capital Receivables Inventory Payables

25 25

• Increase in cash

conversion cycle relative to end 2017 to +2 DAYS

• Elevated inventory level following the ADVANCED PURCHASE

OF CHEESE

• Shortened payable days versus year end due to SEASONALITY

IN PAYMENTS, year-on-year payable days were FLAT

26 26

Challenging Yet Achievable Targets for FY 2018

• Low double-digit growth
• Positive sales momentum

coming from 2Q18

• Boost expected from holidays
• Cautious about seasonal

slowdown and bad weather in 3Q18

• Low double-digit growth
• Margin enhancement

initiatives

• Persistent cost and

inflationary pressures remain

STOCK & INVESTOR RELATIONS HIGHLIGHTS

Stock Highlights

28 28

MARKET CAPITALIZATION

$0.3B

December 2016

$0.4Bn

August 10, 2018

PERFORMANCE SINCE IPO

₱11.26

IPO Price

+17%

Return since IPO as of August 10, 2018

PIZZA

Philippine Consumer Average PER (x)

24.0

25.0 EV / EBITDA (x)

11.4

11.9 ROE (%)

19.6

15.5 Operating Margin (%)*

16.5

9.5 Net Income Margin (%)*

10.8

7.2

Source: BPI Securities 2018 Estimates as of 8/10/2018; *Bloomberg, trailing 12 months

STOCK PRICE PERFORMANCE

(BLOOMBERG TICKER: PIZZA PM) 10.00 12.00 14.00 16.00 18.00 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 PHP/SHARE

PHP13.20

as of August 10, 2018

Investor Relations Highlights

29 29

DIVIDEND HISTORY

*Listing Date: December 15, 2016 **As of 8/10/2018

Current Price PHP13.20 Initial Listing Price PHP11.26 Range since Listing Date* PHP10.90 - 17.48

• No. of Outstanding Shares

1,531,321,053 Shareholding Structure CPGI: 52.9% Arran (GIC): 18.5% Free Float 28.6% (includes Prieto family’s 5.9%) 3-Month Average Turnover PHP6.1 Million USD0.1 Million Market Capitalization PHP20.2 Billion USD0.4 Billion Performance since Listing Date* +17% YTD Relative to Index +7%

*Of previous year’s recurring net income

0.10

0.10

23%

20%

0% 15% 30% 0.00 0.15 0.30 2017 2018 Regular Cash Payout Ratio* Declaration Date Record Date Payment Date 2017 May 8 June 6 June 30 2018 August 16 September 14 October 10

Philippines’ Best Small Cap Company Finance Asia 2018

SHAREHOLDERS

Source: Bloomberg August 2018

Foreign Ownership Limit: 100% Free Float Level: 29%

GIC Private Equity GIC Private Equity 18% 18% Prieto Family Prieto Family 6% 6% Norges Bank Norges Bank 2% 2% Matthews International Matthews International Capital Capital 1% 1% Others Others 20% 20% Ce Century Pacific Group In Inc (C (CPGI) ) 53%

• wh

wholly own wned by th the Philippines’ Po fa family

• ma

majority sh shareholder of CN CNPF PM and ALC LCO PM

Investor Relations Highlights

30 30

SELL-SIDE COVERAGE

Institution Analyst Latest Call BDO Nomura Angelo Torres NEUTRAL BPI Jefferies Javier Consunji BUY CLSA Joyce Ramos BUY COL Financial Andy Dela Cruz HOLD Deutsche Bank Carissa Mangubat BUY Macquarie Karisa Magpayo OUTPERFORM AB Capital Sec Edgar Lay HOLD Regina Capital Patricia Pascual BUY Unicapital Sec Jonathan Latuja BUY

2017 Glossy Annual Report

PIZZA’s 2017 Glossy Annual Report can be found on the Company’s corporate website (www.shakeyspizza.ph):

31 31

Investors > Investor Presentations

2018 Calendar of Activities

Investor Conferences Earnings Release AUG

Nomura Philippine Corporate Day (Hong Kong)

24

dbAccess Philippines Corporate Day (London)

3 SEP

Macquarie ASEAN Conference (Singapore)

29 OCT

*Schedule updated as

• f 10 August 2018

dbAccess Philippines Conference (Manila)

3

3Q18 Earnings Release

12 NOV

Annual Stockholders’ Meeting

16 AUG

32 32

SHAKEY’S PIZZA ASIA VENTURES, INC.

This document is highly confidential and being given solely for your information and for your use and may not be, or any portion thereof, shared, copied, reproduced or redistributed to any other person in any manner. The statements contained in this document speak only as of the date which they are made, and the Company expressly disclaims any obligation or undertaking to supplement, amend or disseminate any updates or revisions to any statements contained herein to reflect any change in events, conditions or circumstances on which any such statements are based. By preparing this presentation, none of the Company, its management, and their respective advisers undertakes any

• bligation to provide the recipient with access to any additional information or to update this presentation or to correct

any inaccuracies in any such information which may become apparent. This presentation contains statements, including forward-looking statements, based on the currently held beliefs and assumptions of the management of the Company, which are expressed in good faith and, in their opinion, reasonable. Forward-looking statements in particular involve known and unknown risks, uncertainties and other factors, which may cause the actual results, financial condition, performance, or achievements of the Company or industry results, to differ materially from the results, financial condition, performance or achievements expressed or implied by such forward-looking

• statements. Given these risks, uncertainties and other factors, recipients of this document are cautioned not to place

undue reliance on these forward-looking statements. Any reference herein to "the Company" shall mean, collectively, Shakey’s Pizza Asia Ventures, Inc. and its subsidiaries. Paranaque City, Philippines +632 839 0156 investorrelations@shakeys.biz www.shakeyspizza.ph http://edge.pse.com.ph/companyInformation/form.do?cmpy_id=664