Investing in Kahiki Foods?

Investing in Kahiki

Back in May, I suggested that Tiki Centralites might consider investing in Kahiki Foods (trading symbol: KSCI) & that I’d research the company. KSCI appears to be a sound investment and an interesting opportunity to own a bit of a tiki legend (however transformed it may now be). There’s even the prospect of having a say in its future! Below are my findings:

KSCI shares are traded as “penny stocks” in the “pink sheets.” The pink sheets are a daily publication of small stocks (i.e. penny stocks). The pink sheets have fewer listing requirements than stock exchanges, such as the Nasdaq or the NYSE.

But, KSCI is making the effort to get an exchange listing. Back in March 2004, Kahiki Foods announced in a press release that it expects to meet the requirements for an exchange listing in the "near future.” Essentially, until KSCI “goes public” you can buy, but not easily sell, KSCI shares. However, if & when KSCI is listed, anyone can buy/sell as many shares as are available, w/ relative ease. Potentially, a lucky so-n-so could make gobs of money by investing in the right company before it moves to one of the big exchanges.

There’s a chance that KSCI might be one of those “right” companies. KSCI has seen rapid growth in the past few years.

June 23, 2004 KSCI announced an increase in sales of 63% for its fiscal year ended March 31, 2004. Earnings were up also: $676,000 compared to last year's loss of $86,000. Basic earnings per share were $0.23 compared to a loss of $.03 for the same period the previous year.

August 16, 2004 Kahiki Foods announced that sales for the first quarter ended June 30, 2004 were $5,215,735 compared to $1,801,301 from the same period the previous year, an increase of 190%. Net income for the three months ended June 30, 2004 was $145,007 compared to a net loss of $70,668 for the three months ended June 30, 2003.

According to Michael Tsao, president and CEO of KSCI, "The growth in revenue was due to volume growth of new products, expanded distribution of existing products both nationally and internationally, and strong sales in the company's retail, club, and foodservice channels. The company's rapid growth has been the major driver for constructing a new, state-of-the-art 119,000-square-foot manufacturing facility in Gahanna, Ohio. It will have capacity to support $75 million in sales and will enhance product quality and operational effectiveness.

In response to KSCI’s growth, KSCI’s share prices have seen significant rises. KSCI share prices steadily increased from March 2001, when it was $1.50, to March 2004, when it was $3.60. That’s an increase of about 25%. As of August 27, 2004, the price of common shares is at $3.01. August 3, 2004 saw a 52-week high of $4.25.

Michael Tsao:

Michael Tsao managed the Trader Vic’s in Beverly Hills for over 10 years before he bought the Kahiki (rather than accept a promotion to VP from Trader Vic’s) w/ a partner in 1978. He has stated that he would like to reopen the Kahiki in a better location and even see it take off as a chain. However, I’m unsure what his position is to date. It took balls to give up a steady gig w/ promotion at Trader Vic’s to buy his own restaurant, & it took balls to redirect the course of Kahiki to manufacturing frozen foods.

Of Interest to Tikiphiles:

Several items stand out to be of interest to tiki-centric folk. For example, “Tiki Bites” figure prominently in KSCI’s line of appetizers. Also, KSCI introduced a frozen foods version of their pupu platter & used their mystery girl to adorn the packaging. KSCI considers its “bold, colorful graphics that command shelf attention” a key product attribute. Presumably, tikis, the Kahiki logo, the mystery girl, etc. all go into making said graphics stand out. A photo of Michael Tsao in July 2004 copy of “Taking Stock” (a supplement of Columbus Business First) shows him in aloha shirt leaning against one of Kahiki’s tikis. These examples suggest that KSCI intends to stay true to its tiki roots & not abandon its Polynesian pop image.

Caveat Emptor:

I’m not a professional trader or consultant, but I do keep a nifty portfolio that stays well above the S&P 500’s average. At the time of writing this piece, I have not purchased KSCI shares, but I intend to do so.

If you think KSCI sounds like a good investment, do your own fundamentals & research. One of the stupidest things anybody can ever do is invest money based on free, unsolicited advice! There certainly are risks involved. For example, the price of chicken (a staple of many of KSCI’s frozen entrees) has been skyrocketing. Furthermore, the pink sheets are notorious for shifty companies, low volume & lack of transparency.

Feel free to email or PM me w/ any questions or if you'd like to know more about my sources (which were all found on Google).

About Pink Sheet Companies:

Investing in pink sheet companies isn’t as cut & dry as investing in publicly traded companies. Also, the commission that a brokerage receives for penny stock orders is higher than w/ regular trades. This is b/c it’s more of an old-fashioned process. The online brokerage that I use is http://www.scottrade.com. They charge a flat free of about $22 for penny stock orders for shares that trade over $1.00.

[ Edited by: Tiki Chris on 2004-08-30 15:55 ]

I have no interest in stocks or the company, but their products are excellant as compared to their competition. Frozen food is bottom of the food chain but they do it well.

[i]KSCI considers its “bold, colorful graphics that command shelf attention” a key product attribute.

As opposed to all those competitive food products on the shelf with their tiny titles and muted colours?

"GENERIC PUU PUUs"

As opposed to all those competitive food products on the shelf with their tiny titles and muted colours?

Tikifish,

Clearly you know a lot more about advertising & commercial graphics than most. It sounds like you’re on the same track as Tsao, w/ respect to understanding what the competition’s like & what you’ve got do to keep up w/ them. Your comment is a great point & leads to a number of important questions:

Do Kahiki’s “bold, colorful graphics” really command shelf attention?

Do their products stand out more than their competitors?

Do tiki-type graphics & mystery girls draw positive attention to Kahiki packages more than other graphics?

Thanks,
Tiki Chris