Morton’s Restaurant Group Inc. (MRT: 5.095 -0.215 -4.05%) announced recently that through a joint venture with a local investor group it is planning to open a brand new steakhouse in Shanghai, China. This will be the company’s sixth Morton’s steakhouse outside the U.S.The company has signed a lease to open a restaurant, which is will likely happen in fiscal year 2010. Morton’s Restaurant will be fully responsible for all the restaurant’s operations. Management believes that with this restaurant the company will expand its presence in the Asia.
We believe the Asia-Pacific region specifically promises solid growth and countries that are of significant interest include China and India. An increase in gross domestic product (”GDP”) within the next few years will considerably increase disposable income in these two countries.
Morton’s Restaurant has been in Asia for 12 years. The company is making efforts to increase its international presence and will do so through joint ventures in which it will have a majority control.
Morton’s Restaurant has benefited from the recovery in business travel having reported 11 cents per share in the first quarter 2010, 4 cents ahead of the Zacks Consensus Estimate. For the second quarter, Morton’s Restaurant expects earnings of 2 cents to 4 cents on revenues of $70 million to $72 million. The current Zacks Consensus Estimate for the second quarter is 3 cents. Comparable restaurant revenues for Morton’s steakhouses are expected to increase 4% to 6% year over year.
For full year 2010, Morton’s Restaurant projects earnings of 29 cents to 34 cents on revenues of $293 million to $298 million. The current Zacks Consensus Estimate for fiscal 2010 is 33 cents. Comparable restaurant revenues for Morton’s steakhouses are expected to increase 3% to 5% year over year.
We maintain a short-term Sell recommendation on Morton’s Restaurant based on lack of growth prospects in the near term.
Based in Chicago, Illinois, Morton’s Restaurant is engaged in the ownership and operation of restaurants. The company primarily operates upscale steakhouse restaurants. As of July 8, 2010, it owned and operated 76 Morton’s The Steakhouse restaurants located in 64 cities across 27 states, Puerto Rico and five international locations (Hong Kong, Macau, Mexico City, Singapore and Toronto) and 1 Trevi Italian restaurant.
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