Fund Manager Summary
The fund managers believe that Retail Food Group Ltd (RFG) presents a significant investment opportunity despite its recent challenges. In their opinion, the market is overestimating the potential costs associated with ACCC actions and underestimating the strength of a post-Covid recovery for RFG’s brands, which include Gloria Jean’s and Donut King. They note that the company has faced difficulties, including a dilutionary capital raising and management issues affecting franchisees. However, with a new board and a potential earnings recovery of 1c per share next year, they see RFG as undervalued at its current price of 6.5c. If RFG can re-establish its dividend within two years and the ACCC acts reasonably, the fund managers are confident the company could be worth more than twice their investment.
Source: Trading View
Commentary From The Managers
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Collins St Asset Management
30 June 2025
$2.01
Summary
- Retail Food Group (ASX:RFG) has successfully turned its business around after past challenges.
- Over the last few years, RFG has refined its offering and exited underperforming sites.
- The company now operates 750 stores domestically under core brands such as Donut King, Gloria Jeans, Brumbies, and Crust Pizza.
- Improving customer sentiment has attracted new interest from substantial and strategic holders.
- The most notable new holder is United Petroleum, which has increased its stake from 10% in June 2024 to 21% by June 2025.
- RFG management has acknowledged synergies between their brands and United Petroleum, although no formal approaches have occurred yet.
- As United Petroleum continues to accumulate shares, corporate activity is anticipated.
- Collins St Asset Management believes RFG is trading too cheaply, with an estimated earnings multiple of 8.5x compared to peer multiples of 15-20x.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Collins St Asset Management
30 June 2025
$2.01
- Retail Food Group (ASX:RFG) has successfully turned its business around after past challenges.
- Over the last few years, RFG has refined its offering and exited underperforming sites.
- The company now operates 750 stores domestically under core brands such as Donut King, Gloria Jeans, Brumbies, and Crust Pizza.
- Improving customer sentiment has attracted new interest from substantial and strategic holders.
- The most notable new holder is United Petroleum, which has increased its stake from 10% in June 2024 to 21% by June 2025.
- RFG management has acknowledged synergies between their brands and United Petroleum, although no formal approaches have occurred yet.
- As United Petroleum continues to accumulate shares, corporate activity is anticipated.
- Collins St Asset Management believes RFG is trading too cheaply, with an estimated earnings multiple of 8.5x compared to peer multiples of 15-20x.
Summary
Collins St Asset Management
31 Dec 2024
$2.55
- Collins St Asset Management highlights RFG as a fundamentally good company despite its checkered past.
- The market's recognition of RFG's intrinsic value is deemed crucial to prevent competition from capitalizing on this.
- In the last six months, Thorney Investment Group and United Petroleum Group have entered RFG’s registry, indicating growing investor interest.
- United Petroleum currently owns 19.9% of RFG, and Thorney owns over 5%.
- There are no guarantees about future developments; however, Collins St Asset Management remains optimistic about 2025.
- Positive expectations are indicated for many of the fund’s holdings.
Summary
Collins St Asset Management
30 June 2023
$2.28
- Collins St Asset Management first bought Retail Food Group (RFG) in 2021, anticipating post-Covid normalization to benefit the company.
- Belief that RFG was priced cheaply due to the overhang of an ACCC case related to past management issues.
- Pleased with management's strategic pivot, being selective in new franchisee acquisitions.
- RFG has made lasting adjustments to adapt to the new normal, such as launching a virtual ribs business, "Rack’em Bones BBQ Ribs".
- This initiative utilizes existing pizza ovens during downtime to create additional cash flows and profits.
- Continues to appreciate the positive cultural change and future growth prospects, both locally and internationally.
- Observations of insider stock purchases indicate confidence in the company's future.
- Currently trading at 7.5x 2024 earnings, suggesting significant upside potential for Retail Food Group.
Summary
Collins St Asset Management
31 Dec 2022
$3.48
- Collins St Asset Management first invested in Retail Food Group in 2020 during a turnaround phase.
- Two key factors identified:
- Return to post-Covid normal with a focus on local coffee and cake shops.
- Removal of overhang related to ACCC actions against previous management.
- Resilience of the company’s brands has been surprising, with successful strategies like shrinking to greatness.
- Brands such as Gloria Jean's (11% growth in 2022) and pizza offerings (10% growth in 2022) continue to grow despite challenges.
- Investor disinterest linked to litigation overhang and costs of settlements.
- Initial speculations regarding settlement costs were as high as $30 million, but final agreement was under $10 million.
- With regulatory overhang removed, there is optimism for continued company growth.
- Collins St Asset Management believes RFG’s share price will be driven by fundamentals rather than peripheral issues.
- Despite uncertainty regarding future progress, there is still a belief in profit potential even at current levels of 9c.
Summary
Collins St Asset Management
31 Mar 2021
$2.92
- Collins St Asset Management views RFG as a franchise business owning brands like Gloria Jean’s, Brumby’s, Donut King, and Michel’s Patisserie.
- RFG faced multiple challenges leading to a significant drop in share price, from $1 to as low as 2.6c during the Covid crash.
- The decline was exacerbated by previous management's mistreatment of franchisees, prompting intervention from the ACCC.
- Collins St Asset Management believes the market is overestimating the potential costs of ACCC action.
- There is confidence in the strength of a post-Covid recovery for RFG’s brands.
- At 6.5c per share, Collins St Asset Management perceived RFG as a bargain and acquired over 5% of the company.
- If RFG meets consensus earnings expectations of 1c per share next year and reinstates dividends within two years, the company is considered undervalued.
- Collins St Asset Management remains optimistic about the eventual market realization of RFG's true value, which they believe is over twice their purchase price.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"While the clouds of regulatory scrutiny loom, Retail Food Group's potential for a post-COVID resurgence appears underestimated. If the company navigates these challenges wisely, it could emerge not just intact, but thriving—far exceeding its current valuation."
Last Updated: 30 Jun 2025
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Frequently Asked Questions
Who is investing in Retail Food Group Ltd (ASX:RFG)?
Fund managers including Collins St Asset Management have invested in Retail Food Group Ltd (ASX:RFG).
Why do fund managers invest in Retail Food Group Ltd?
Fund managers invest in Retail Food Group Ltd due to its potential for recovery despite past challenges. They believe the market has overreacted to regulatory issues and the impact of COVID-19, undervaluing the strength of its franchise brands like Gloria Jean’s and Donut King. With expectations of improved earnings and a possible dividend reinstatement, they see significant upside potential in the company's valuation.
What happened to Retail Food Group Ltd (ASX:RFG)?
There have been no recent updates from fund managers regarding Retail Food Group Ltd although fund managers including Collins St Asset Management have previously commented.