Four More IPO's Part IV: PLAY, BOOT, FRPT, VA

8/10/2019 Four More IPO's Part IV: PLAY, BOOT, FRPT, VA

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FOUR MORE IPOs Part IV: PLAY, BOOT, FRPT,VA

Dave & Buster's Entertainment, Inc. (NASDAQ: PLAY) www.daveandbusters.com

Boot Barn Holdings, Inc. (NYSE: BOOT) www.bootbarn.com

Freshpet, Inc. (NASDAQ: FRPT) www.freshpet.comVirgin America Inc. (NASDAQ: VA) www.virginamerica.com

In our TFST IPO series, we highlight IPOs we think will outperform the market. This report is the

fourth installment in the series. The first three installments are in our archive or can be viewed

here,here,andhere.Prior to revealing the 4 new IPOs we are watching, let us review the

performance of our previous IPO recommendations.

The vast majority of IPOs that we singled out were wildly successful with an average return of

67% since our review. So far in 2014 Three IPOs generated above 100% return and GPRO

generated a 238% return. So far in 2014 there have been more than 200 IPOs.AS

ILLUSTRATED, SELECTIVITY IN THE IPO AFTERMARKET WILL ALLOW YOU TO DISCOVER GOLD.

The following IPOs are very recent and are in their quiet period (25 days from IPO). During thatperiod, we have an opportunity to slowly accumulate shares before the bankers associated with

the IPO produce research on the companies. This research usually paints a very optimistic

outlook with Price Targets well above current prices. On rare occasions, shares may be

overvalued and the end of the quiet period may be a catalyst for underperformance.

Ticker Purchase Price

Date

Recommended High Price

Return to High

Price

GRUB $34.00 4/16/2014 $45.80 35%

JD $20.25 5/27/2014 $33.10 63%

TRUE $11.75 6/5/2014 $25.00 113%

ANET $56.70 6/6/2014 $94.84 67%

GPRO $29.15 6/26/2014 $98.47 238%

LOCO $19.00 7/25/2014 $41.70 119%

MBLY $37.00 8/1/2014 $60.28 63%

TTOO $14.25 8/7/2014 $24.50 72%

DSKY $18.00 8/7/2014 $25.95 44%

TSQ $11.26 8/19/2014 $12.85 14%

BABA $88.31 10/6/2014 $120.00 36%CYBR $29.00 9/30/2014 $44.89 55%

VSLR $13.05 10/5/2014 $15.45 18%

W $32.80 10/5/2014 $34.55 5%
http://www.daveandbusters.com/http://www.daveandbusters.com/http://www.bootbarn.com/http://www.bootbarn.com/http://www.freshpet.com/http://www.freshpet.com/http://www.virginamerica.com/http://www.virginamerica.com/http://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/09/4-IPOS-FOR-THE-SECOND-HALF-OF-2014-final-June-6-2014.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/09/4-IPOS-FOR-THE-SECOND-HALF-OF-2014-final-June-6-2014.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/09/4-More-IPOs-for-H2-2014.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/09/4-More-IPOs-for-H2-2014.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/09/4-More-IPOs-for-H2-2014.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/10/4-More-IPOs-for-Q4-2014-Final-Oct-5-20141.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/10/4-More-IPOs-for-Q4-2014-Final-Oct-5-20141.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/10/4-More-IPOs-for-Q4-2014-Final-Oct-5-20141.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/10/4-More-IPOs-for-Q4-2014-Final-Oct-5-20141.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/09/4-More-IPOs-for-H2-2014.pdfhttp://www.thefocusedstocktrader.com/secured/members/blog/wp-content/uploads/2014/09/4-IPOS-FOR-THE-SECOND-HALF-OF-2014-final-June-6-2014.pdfhttp://www.virginamerica.com/http://www.freshpet.com/http://www.bootbarn.com/http://www.daveandbusters.com/


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Dave & Buster's Entertainment, Inc. NASDAQ: PLAY

11/14/2014 Closing Price: $22.58 11/14/2014 Market Cap (mn): $882.56

TTM Sales (mn): $689.91 TTM EPS: $-52.19

IPO Date: 10/10/2014 End of Quiet Period: 11/29/2014

Company Overview

Dave & Busters is a leading owner and operator North America venues that combine dining

and entertainment for both adults and families. The companys core concept is to offer

customers the opportunity to Eat Drink Play and Watch all in one location. Eat and Drinkisoffered through a full menu of Fun American New Gourmet entres and appetizers and a full

selection of non-alcoholic and alcoholic beverages. Its Play and Watchoffering provide an

extensive assortment of entertainment attractions centered around playing games and

watching live sports and other televised events. Customers are a balanced mix of men and

women, primarily between the ages of 21 and 39, but Dave & Busters also servesalso as an

attractive venue for families with children and teenagers.

As of September 26, 2014, Dave & Busters owned and operated 70 stores in 27 states and

Canada.

For the twelve months ended August 3, 2014, the company generated total revenues of $689.9

million, Adjusted EBITDA of $149.0 million (representing an Adjusted EBITDA margin of 21.6%)

and a net loss of $7.7 million.


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For fiscal 2013, the company generated total revenues of $635.6 million, Adjusted EBITDA of

$134.8 million (representing an Adjusted EBITDA margin of 21.2%) and net income of $2.2

million. From fiscal 2011 to fiscal 2013, total revenues and Adjusted EBITDA grew at a

compound annual growth rate of 8.3% and 17.1%, respectively. The company generated

comparable store sales increases of 5.2%, 1.0%, 3.0% and 2.2% in the twenty-six weeks ended

August 3, 2014 and fiscal 2013, 2012 and 2011, respectively.

The formats and square footage of Dave & Busters stores are flexible allowing the company to

customize new stores for each market. The average store size is 45,000 square feet and range in

size between 16,000 and 66,000 square feet. In fiscal 2013, the average revenues per store

were $10.1 million, average Store-level EBITDA was $2.6 million and average Store-level EBITDA

margin was 25.9%. Furthermore, for that same period, all comparable stores had positive Store-

level EBITDA, with 89.1% of stores generating more than $1.0 million of Store-level EBITDA each

and 61.8% of stores generating more than $2.0 million of Store-level EBITDA each.

Dave & Busters $10.1 million average revenue per store is one of the highest in the casual

dining industry.


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Eat

Dave & Busters seeks to distinguish its food menu from other casual dining concepts with a

strategy of offering Fun American New Gourmetentres and appetizers. The Fun American

New Gourmetmenu is intended to appeal to a broad spectrum of customers and include

classic American offerings with a fun twist. The broad menu offers something for everyone

and captures full meal, snacking and sports-viewing occasions. New menu items are introduced

three times per year to reinforce the fun of the Dave & Busters brand. Food revenues, which

include non-alcoholic beverages, accounted for 33.6% of total revenues during fiscal 2013.

Drink

Each location also offers a full bar service, including a variety of beers, signature cocktails,

premium spirits and non-alcoholic beverages. Like the food menu, new beverage items are

introduces three times per year. Alcoholic beverage revenues accounted for 31.1% of total food

and beverage revenues and 15.2% of total revenues during fiscal 2013.

Play

A key aspect of the entertainment experience at Dave & Busters is the games in the Midway,

which management believes are the core-differentiating feature of the companys brand. TheMidway in each store is an area offering a wide array of amusement and entertainment

options, typically with over 150 redemption and simulation games. Amusement and other

revenues accounted for 51.2% of total revenues during fiscal 2013.

Watch

Sports viewing is another key component of the entertainment experience at Dave & Busters.

All stores have multiple large screen televisions and high quality audio systems providing


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customers with a venue for watching live sports and other televised events. In fiscal 2010, the

company initiated a program that evolved into D&B Sports, which is a more immersive

viewing environment providing customers with an average of 40 televisions, including 100+

inch high definition televisions, to watch televised events and enjoy the full bar and extensive

food menu. Through continued development of the D&B Sports concept in new stores and

additional renovations of existing stores, the companys goal is to build awareness of D&BSports as the best place to watch sports and the only place to watch the games and play the

games.

Market Opportunity

Dave & Busters believes there is a potential in the United States and Canada to open in excess

of 200 stores, approximately three times the current store base. The company plans on opening

seven to eight stores in fiscal 2014, including five stores already opened, which will be financed

with available cash and operating cash flows. The company will continue opening new stores at

an annual rate of approximately 10% of the existing store base.

Conclusion

Dave & Busters has a differentiated offering and the opportunity to triple its store count

ensuring significant room for growth. Very strong store economics, and the ability to finance

growth internally, and strong growth prospects should benefit shareholders.


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Boot Barn Holdings, Inc. NYSE: BOOT11/15/2014 Closing Price: $20.00 11/15/2014 Market Cap (mn): $498.58

TTM Sales (mn): $363.79 TTM EPS: $0.35


Company Overview

Boot Barn Holdings isthe largest and fastest-growing lifestyle retail chain devoted to western

and work-related footwear, apparel and accessories in the U.S. As of September 27, 2014, the

company had 158 stores in 24 states. The nearest direct competitor selling primarily western

and work wear has half the locations.

The company believes it can grow its store base to at least 400 domestic locations


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Boot Barns storesare typically freestanding or located in strip centers. The average store is

10,800 square feet and features a comprehensive assortment of roughly 200 brands and more

than 1,500 styles on average. The company targets a broad and growing demographic, ranging

from passionate western and country enthusiasts to workers seeking dependable, high-qualityfootwear and clothing. Boot Barn strives to offer an authentic, one-stop shopping experience

that fulfills the everyday lifestyle needs of its customers resulting in many customers making

purchases in both the western and work wear sections of the companysstores.

Boot Barn was founded in 1978 and, over the past 36 years, has grown both organically and

through successful strategic acquisitions of competing chains. Acquired chains have been

rebranded and remerchandised under the Boot Barn banner, resulting in sales and profit

increases over original concepts.

Boot Barn has had 19 consecutive quarters of positive same store sales growth averaging 11.3%

per quarter and same store sales growth of 6.7% in fiscal 2014.


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Boot Barn expanded its store base to 158 stores on September 27, 2014 from 86 stores on

March 31, 2012, with 17 new stores resulting from organic growth and 55 new stores resulting

from strategic acquisitions. The companys net sales reached$345.9 million in fiscal 2014, an

increase of $177.2 million since fiscal 2012, representing a CAGR of 43.2%. Over the same

period, Adjusted EBITDA grew by 36.2% per year since 2012.

Market Opportunity

The U.S. western and work wear markets are large, growing and highly fragmented. The U.S.

western and work wear markets represented approximately $8 billion and $12 billion in retail

sales, respectively, in 2013. Between 2009 and 2013, the western and work wear markets

experienced estimated annual retail sales growth of 6% to 8% and 1% to 3%, respectively.

Over the next three to five years, Md estimates that retail sales in the western and work wear

markets will grow annually at approximately 3% to 5% and 2% to 4%, respectively.


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Conclusion

Boot Barn has a very strong position in the $20bn Western and Work Market. It believes it can

grow its store count by over 150% financed through internal cash flows allowing shareholders

to be the main beneficiary of the companys growth.


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Freshpet, Inc. NASDAQ: FRPT

11/14/2014 Closing Price: $18.84 11/14/2014 Market Cap (mn): $599.11

TTM Sales (mn): $74.16 TTM EPS: $ -3.30


Company Overview

Freshpet started with a single mission of bringing real, fresh food to our dogs and cats. On the

back of that mission, over the last eight years, the company created a comprehensive business

model to deliver wholesome pet food that pet parents can trust. This mission and business

model makes Freshpet one of the fastest growing pet food companies in North America.

According to Euromonitor, the North American pet food industry is $22.5 billion. The market

grew by 3% per year between 2007 and 2013. Consumers reassessing conventional dog and

cat food products and the trends of growing pet humanization and health/wellness drive

growth in the pet food industry. With conventional dog and cat food unchanged for decades,

Freshpets brand is positioned to benefit from these mainstream trends.


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The company prices its products to be accessible to the average consumer allowing for broad

demographic appeal and penetration of multiple classes of retail distribution including grocery,

mass, club, pet specialty and natural. The companys network of Freshpet Fridges are in leading

retail chains such as Albertsons, BJs, Kroger, Petco, PetSmart, Publix, Safeway, Target, Wal-Mart and Whole Foods.

The strength of the companys business model extends to its retail partners, who believe that

Freshpet grows their pet category sales, drives higher traffic, increases shopper frequency and

delivers category-leading margins. This is evident by the tremendous growth in locations.

Selected Customers Year Entered

Freshpet Fridge

Locations

at Launch

Freshpet Fridge

Locations

as of September 30, 2014

Wal-Mart 2007 51 1,607Petco 2007 97 1,364

PetSmart 2006 29 1,306

Target 2012 50 1,157

Kroger 2007 185 972

Whole Foods 2012 29 226

Freshpet Fridge store locations increased from 7,001 in 2011 to 10,836 in 2013, representing a

compounded annual growth rate of 24%. As of June 30, 2014, there were 12,593 installed

Freshpet Fridges, representing 28% growth over the number as of June 30, 2013.

Freshpet net sales increased from $25.4 million in 2011 to $63.2 million in 2013, representing a

compounded annual growth rate of 58%; and for the six months ended June 30, 2014, net sales

grew 38% year on year to $39.7 million.

Management believes the opportunity exists to Freshpet Fridge in at least 35,000 stores across

North America almost triple the companys fridge count.The companys market share is

currently less than 1% of the overall $22.5 billion North American pet food market so there is

an opportunity for the company to continue gaining share for a long time.


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Conclusion

Freshpet is disrupting the $22.5 billion pet food industry by providing premium fresh pet food

at mass market prices. The company only has 1% of the overall market but its network of

Freshpet Fridges are growing at above 20% per year due to the companys product quality,

differentiated offering and value proposition to retailers. Sales should continue to grow at evenfaster pace with management expecting 30% growth in sales over the next three years.

Freshpet also has tremendous operating leverage leading to even higher earnings growth.


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Virgin America Inc. NASDAQ: VA

11/15/2014 Closing Price: $30.00 11/14/2014 Market Cap (mn): $1,296

2013 Sales (mn): $1,424.7 2013 EPS: $1.56


Company Overview

Virgin America is a premium-branded, low-cost airline based in California providing scheduled

air travel in the continental United States and Mexico. The company operates primarily from

Los Angeles and San Francisco flying to other major business and leisure destinations in North

America. Virgin America provides a distinctive offering for passengers centered around a

premium travel experience, while at the same time maintaining a low-cost structure through apoint-to-point network and high utilization of an efficient, single fleet type. As of September 30,

2014, Virgin America provided service to 21 airports in the United States and Mexico with a

fleet of 53 narrow-body aircraft.

A key component of Virgin Americas product is the personalized level of service provided to

customers. Other elements of Virgin Americas low cost premium product include power


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outlets next to every seat, in-flight wireless internet access, distinctive on-board mood lighting,

leather seats, high-quality food and beverage offerings and Redin-flight entertainment system,

featuring a nine-inch personal touch-screen interface. The company has won many awards,

including Best Domestic Airline in Travel + Leisure Magazines Worlds Best Awardsand Best

Domestic Airline in CondNast Traveler MagazinesReaders Choice Awards for the past seven

consecutive years as well as Best U.S. Business/First Class Airline in Cond NastTraveler Magazines Business Travel Pollfor the past six consecutive years. In 2013, Virgin

America received the highest Airline Quality Rating illustrating the execution of the companys

premium strategy.

A disciplined cost control is also core to Virgin Americas strategy. The company operates one of

the youngest fleets among U.S. airlines. Its fleet is entirely fuel-efficient Airbus A320-family

aircraft. The homogenous nature of Virgin Americas fleet lets the companyavoid the

operational complexities and cost disadvantages of carriers with multiple and older fleet types.


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Market Opportunity

Virgin America serves only 15 of the 50 largest metropolitan areas in the United States and 3

leisure destinations in Mexico. There are opportunities to expand the companys service from

its focus cities of Los Angeles and San Francisco to other large markets throughout the United

States, Canada and Mexico. The firm will take delivery of ten Airbus A320-family aircraft from

July 2015 through June 2016, and will continue to grow beyond 2016. While the companys

expansion in the next several years will focus on the opportunities at Los Angeles and SanFrancisco, the company is also growing its presence in Dallas, Texas.

Conclusion

Virgin America has a very strong brand and a high quality fleet both of which are crucial to the

company achieving its premium low cost strategy. The company has good growth prospects by

serving only 15 of the 50 largest metros and a commitment to take delivery of 10 more planes

over the next three years.

Four More IPO's Part IV: PLAY, BOOT, FRPT, VA

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