For Immediate Release
Chicago, IL – February 23, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include HSBC Holdings Plc. , Barclays Plc (BCS - Analyst Report), Royal Bank of Scotland Group Plc (RBS - Snapshot Report), Lloyds Banking Group (LYG - Snapshot Report) and P.F. Chang's China Bistro Inc. .
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Here are highlights from Wednesday’s Analyst Blog:
HSBC to Issue Shares to Pay Bonuses
In order to follow the regulators’ advice regarding cash conservation, HSBC Holdings Plc. is planning to issue shares to pay cash bonuses to its UK-based senior executives. After issuing new shares, the company will sell the same in the open market. The proceeds from the sale of these shares will be utilized to pay non-deferred cash compensations of more than £50,000 ($79,000).
However, employees who receive total cash bonuses below £50,000 will be getting the same as they used to get from the company’s cash balance.
The total incentive payable to HSBC’s UK-based top executives will not be lowered. The company will be issuing millions of pounds worth of new shares to cover the non-deferred cash bonuses. Last year, about 20% of the bonuses to top-executives were paid upfront in cash. Currently, the total number of employees affected by the new payment structure is not known.
This new system of paying incentives to its employees is being used by HSBC for the first time. Moreover, this came at the time when banks are getting pressurized by the financial regulators to maintain a stable cash balance to meet the stringent capital requirements and to cushion against the probable global meltdown.
Further, HSBC’s move will appease employees who prefer cash bonuses over company shares. However, the shareholders’ value will be eroded as new shares will have a dilutive effect on the earnings going forward.
While HSBC will be undertaking this new system to stop curtailment of cash bonuses, other UK based banks including Barclays Plc (BCS - Analyst Report), Royal Bank of Scotland Group Plc (RBS - Snapshot Report) and Lloyds Banking Group (LYG - Snapshot Report) will put a cap on the cash incentives to preserve their capital.
Currently, HSBC retains a Zacks #4 Rank, which translates into a short-term Sell rating.
P.F. Chang’s Buys True Food Kitchen
P.F. Chang's China Bistro Inc. recently inked a definitive agreement to obtain a majority equity ownership position in True Food Kitchen – a Fox Restaurant Concept (“FRC”) specializing in healthy, locally sourced and globally inspired meals.
In 2009, the company entered into an agreement with FRC to provide debt capital for the early-stage development of True Food Kitchen restaurants. Per the agreement, P.F. Chang's obtained a right to convert its loan into a majority equity ownership position.
In February 2012, the partners of P.F. Chang’s and True Food Kitchen mutually agreed to exercise the company’s conversion option. The action is expected to be completed in the second quarter of 2012.
Upon completion, P.F. Chang’s will hold 51% of True Food Kitchen. Further, P.F. Chang will have rights to increase its ownership to 90% or more in the future. Future unit development of True Food Kitchen will be funded through a combination of cash flow from the existing True Food Kitchen restaurant and P.F. Chang's cash. P.F. Chang's does not expect any significant accretion or dilution to earnings this year from this conversion.
Founded in August 2010, there are currently four True Food Kitchen units with two restaurants in Arizona and two in California. Two more units are slated to open in 2012. The True Food Kitchen concept supports the rising demand for healthier menu options that Americans essentially look for these days while dining out.
The brand has already created a solid customer base within a short span, with strong unit economics. Current average unit volumes are about $6 million with industry-leading cash margins. These attributes made True Food Kitchen a lucrative acquisition target.
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