RICK - RCI Hospitality (RICK) - Follow the Cash Flow Initiation on RCI Hospitality Holdings

Initiation. We are initiating research coverage on RCI Hospitality Holdings, Inc. with an Outperform rating and a $100 12-month price target. RCI is the only publicly traded Gentlemen's club operator with a fast growing military themed sports bar and restaurant chain. We believe the unique combination, with significant inorganic and organic growth opportunities, presents investors with a favorable risk/reward opportunity.A Cash Flow Focus. Management employs a disciplined cash flow focus, seeking 25-33% cash-on-cash returns for both the Gentlemen's clubs and Bombshells business, with stock repurchases employed when FCF yield exceeds 10%. The goal is to drive 10-15% compound annual FCF per share growth.Gentlemen's Clubs. RCI currently operates 49 Gentlemen's clubs, making it one of the largest operators in the industry. As the only publicly traded operator, RCI has become the buyer of choice for owners seeking an exit. The Company has dominate positions in many markets but with a less than 3% overall share of clubs, there remains significant room for additional growth.Bombshells. Bombshells provides RCI with a high growth organic growth opportunity, both through opening of owned locations as well as franchised. Currently there are 11 owned locations opened with an additional nine planned over the next 30 months, with the first franchised location to open in the first half of 2022 and more to follow.Projections. We believe RCI is at an inflection point as the recent acquisition of 12 Gentlemen's clubs provides critical mass and should result in additional inorganic growth opportunities, while Bombshells has tremendous upside growth potential. For the fiscal first quarter we are projecting revenue of $61.5 million and EPS of $1.09, while for the full year we are projecting revenue of $259 million, EBITDA of $80.4 million, and EPS of $4.72. Read More >>