Independent Research, US Dominant Players, Investment Talk

Investment Talk

Independent Research, US Dominant Players

Investment Talk is for readers who wish to learn about companies that are potentially outside of their own circle of research, as well as those who are longing to become part of a community of like-minded investors and learn more about investment research. I would describe myself as a long-term investor who typically takes a 3Y to 5Y outlook, before reassessing once that period matures. I follow the adage that one should research, reach a conclusion, and then verify and continue to hold so long as the thesis remains intact. My own investing style is one that seeks to find dominant players within their respective market who have shown signs of monopoly or oligopolistic behaviour, unlikely to be disrupted, in tandem with discovering market disruptors who have a high likelihood of disrupting their respective market. Equally (and weighted accordingly) I seek to discover more nuanced, misunderstood, situations with a shorter time frame.

Equity Bottom-Up

Tortilla Mexican Grill PLC / Equity Bottom-Up

<ul><li>Tortilla Mexican Grill is a small cap (market cap ~£48M) listed on the UK AIM exchange and is somewhat illiquid.</li><li>The chain boasts the largest portfolio of stores across the country in its subcategory, outranking its closest competitor by a factor of 5x.</li><li>As a recent IPO, and one that trades in a somewhat illiquid manner, I urge caution to those reading. These are merely my preliminary notes on the company.</li></ul>

Tortilla Mexican Grill is a small cap (market cap ~£48M) listed on the UK AIM exchange and is somewhat illiquid.The chain boasts the largest portfolio of stores across the country in its subcategory, outranking its closest competitor by a factor of 5x.As a recent IPO, and one that trades in a somewhat illiquid manner, I urge caution to those reading. These are merely my preliminary notes on the company.

Leading International Investment Research, Edison Investment Research

Edison Investment Research

Leading International Investment Research

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Notwithstanding its sector ‘sweet spot’ (a healthy, customisable product at a competitive price), Tortilla Mexican Grill (Tortilla) has taken the opportunity of a change in management to refine its strategy to address challenges since its successful IPO in 2021 as well as expedite growth. Significant benefit is expected from a new delivery structure to mitigate commission charges in an important part of the business (c 30% of sales), from enhanced marketing to tackle surprisingly low brand awareness and from an initial director of food to bolster menu development. With a new FY24 target of self-funded roll-out (down from 12 to eight), franchising will drive expansion as capital light and has been so successful to date. A near-doubling in H223 pre-IFRS 16 adjusted EBITDA, if from a low base, is testament to Tortilla’s recovering financials and initiatives already in place.

Notwithstanding its sector ‘sweet spot’ (a healthy, customisable product at a competitive price), Tortilla Mexican Grill (Tortilla) has taken the opportunity of a change in management to refine its strategy to address challenges since its successful IPO in 2021 as well as expedite growth. Significant benefit is expected from a new delivery structure to mitigate commission charges in an important part of the business (c 30% of sales), from enhanced marketing to tackle surprisingly low brand awareness and from an initial director of food to bolster menu development. With a new FY24 target of self-funded roll-out (down from 12 to eight), franchising will drive expansion as capital light and has been so successful to date. A near-doubling in H223 pre-IFRS 16 adjusted EBITDA, if from a low base, is testament to Tortilla’s recovering financials and initiatives already in place.

<ul><li>Tortilla is a clear market leader, boasting 5x more units than the nearest competitor, operating a superior supply chain, and is highly cash-generative with a track record of savvy capital allocation.</li><li>The founder and CEO have reasonable equity stakes in the business.</li><li>As peers went into administration during the pandemic, they expanded aggressively and acquired a competitor for a reasonable price.</li></ul>

Tortilla is a clear market leader, boasting 5x more units than the nearest competitor, operating a superior supply chain, and is highly cash-generative with a track record of savvy capital allocation.The founder and CEO have reasonable equity stakes in the business.As peers went into administration during the pandemic, they expanded aggressively and acquired a competitor for a reasonable price.

MEX: “A Recession is an Ideal Time for Expansion”

Tortilla Mexican Grill’s (Tortilla’s) continued ‘massive’ outperformance of the UK restaurant market despite, and because of, COVID-19 is further endorsement of the company’s difference to most UK hospitality businesses. Tortilla’s ‘transformational’ 2021 saw 24% like-for-like sales growth versus 2019 (adj. pre-IFRS 16 EBITDA more than trebled) followed by similar momentum in Q122 and heightened optimism about growth opportunities accelerated by the pandemic, which echoes that of big brother Chipotle (NYSE: CMG) in the US. With its popular value offering in tune with the times and scalability shown by burgeoning partnerships with SSP Group, Compass Group and Merlin, Tortilla is on track for 45+ company-run openings by end 2026 (c nine this year) backed by a cash-generative model, low site capex and c £14m liquidity at December 2021.

Tortilla Mexican Grill’s (Tortilla’s) continued ‘massive’ outperformance of the UK restaurant market despite, and because of, COVID-19 is further endorsement of the company’s difference to most UK hospitality businesses. Tortilla’s ‘transformational’ 2021 saw 24% like-for-like sales growth versus 2019 (adj. pre-IFRS 16 EBITDA more than trebled) followed by similar momentum in Q122 and heightened optimism about growth opportunities accelerated by the pandemic, which echoes that of big brother Chipotle (NYSE: CMG) in the US. With its popular value offering in tune with the times and scalability shown by burgeoning partnerships with SSP Group, Compass Group and Merlin, Tortilla is on track for 45+ company-run openings by end 2026 (c nine this year) backed by a cash-generative model, low site capex and c £14m liquidity at December 2021.

Tortilla Mexican Grill - That’s a wrap!

United Kingdom

Tortilla Mexican Grill PLC owns and operates a chain of fast-casual Mexican restaurants. The Company offers fresh and customizable products range of burritos, tacos, quesadillas, and salads. Tortilla Mexican Grill serves customers in the United Kingdom and Middle East.

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Tortilla Mexican Grill PLC (MEX LN)

MEX: Tortilla Mexican Grill

The chain boasts the largest portfolio of stores across the country in its subcategory, outranking its closest competitor by a factor of 5x.

Investment Talk

Tortilla Mexican Grill - Cracking on

Notwithstanding its sector ‘sweet spot’ (a healthy, customisable product at a competitive price), Tortilla Mexican Grill (Tortilla) has taken the...

Edison Investment Research

MEX: “A Recession is an Ideal Time for Expansion”

As peers went into administration during the pandemic, they expanded aggressively and acquired a competitor for a reasonable price.

Investment Talk

Tortilla Mexican Grill - That’s a wrap!

Tortilla Mexican Grill’s (Tortilla’s) continued ‘massive’ outperformance of the UK restaurant market despite, and because of, COVID-19 is further...

Edison Investment Research

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