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    Stock Alert for Kona Grill Inc. (KONA)

    Kona Grill Inc. (KONA) owns and operates 24 restaurants located in 16 states. The Company’s menu features appetizers, salads, sandwiches, chicken, seafood, steaks, pasta and pizzas. It also offers sushi, including sashimi, traditional favorites, and several proprietary dishes created by its sushi chefs.

    Share Statistics (20-Sept-11)

    FY2009 FY2010 % Chg Q22010 Q22011 % Chg
    Symbol KONA Revenue, $Mn 81.09 87.59 8.0% 22.69 25.77 13.6%
    Current price $6.61 Gross marg. 38.9% 37.8% -2.8% 39.2% 39.4% 0.5%
    52wk Range: $3.12-$7.90 Oper. margin -1.7% 3.1%
    Avg Vol (3m): 65,664 Net margin -26.6% -1.8% -93.2% 1.1% 3.0% 172.7%
    Market Cap. 60.93M
    Shares Outstanding 9.22M EPS, $ -1.18 -0.14 -88.1% 0.03 0.08 166.7%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of KONA have gained 34.8% in the last five days; 54.6% in the last month; and 99.4% year to date.

    Shares of the American grill and sushi bar traded as much as 35% higher yesterday, a day after the company boosted its outlook for the third quarter ending September 30, 2011.

    Having seen strong sales in the quarter, the Company now expects revenue in the $24.1 million and $24.2 million range, a $500,000 increase on the high end of its guidance previously revised on August 1, 2011. The updated guidance anticipates same-store sales growth of approximately 9% over the same year-ago quarter, as compared to 6% growth previously forecast.

    The Company also hiked its net income guidance to $0.5 million to $0.6 million, or $0.05 to $0.06 per share, from the previous guidance of $0.1 million to $0.3 million, or $0.01 to $0.03 per share.

    Analysts, on average, are looking for earnings of $0.03 a share, on revenue of $23.6 million, according to Thomson Reuters I/B/E/S data.

    According to Michael Nahkunst, KONA interim president and CEO, KONA’s revised outlook for stronger earnings in the third quarter firmly supports the Company’s forecast of achieving profitability for the year.

    Feltl and Co. recently upgraded KONA from a Buy rating to a Strong Buy rating.  In a Reuters report, analyst Mark Smith said the Company is outperforming other casual diners and said he expects its strong sales growth will continue into the fourth quarter.

    Source:

    http://phx.corporate-ir.net/phoenix.zhtml?c=191864&p=irol-newsArticle&ID=1608129&highlight=

    http://www.reuters.com/article/2011/09/20/us-konagrill-idUSTRE78J45120110920?feedType=RSS&feedName=globalMarketsNews&rpc=43

    Financial Summary

    KONA reported its restaurant sales increased 13.6% to $25.8 million for its second quarter ended June 30, 2011, from $22.7 million in the same year-ago quarter. The sales improvement reflects a 9.1% increase in same-store sales driven by strong traffic, higher average guest check and approximately 2.2% in menu pricing, as well as additional revenue from the Kona Grill in Baltimore, Maryland that opened during the fourth quarter of 2010. The 9.1% increase in same-store sales compares to a 7.6% increase in the prior quarter and a 0.3% decrease in the second quarter of 2010.

    Average weekly sales for the 23 restaurants in the comparable base were $80,140 in the second quarter of 2011, compared to $73,450 in the same year-ago quarter. Average weekly sales for restaurants not in the comparable base increased 16.6% to $68,550 in the second quarter of 2011 versus $58,800 last year.

    Net income for the second quarter of 2011 was $0.8 million or $0.08 per share, an improvement from net income of $0.3 million, or $0.03 per share, in the same year-ago quarter. Excluding severance and other charges related to the departure of the company’s former CEO, net income for the second quarter of 2011 was $1.0 million or $0.11 per share. This compares to net income of $0.4 million or $0.05 per share in the same year-ago quarter, excluding legal and professional fees associated with a contested proxy solicitation.

    Source:

    http://phx.corporate-ir.net/phoenix.zhtml?c=191864&p=irolnewsArticle&ID=1589174&highlight=

    Financial Strength (20-Sept-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 1.04 1.10 0.77
    Current Ratio (MRQ) 0.73 1.17 1.33 1.13
    LT Debt to Equity (MRQ) 0.00 57.43 55.20 110.33
    Total Debt to Equity (MRQ) 1.87 87.04 95.02 148.04
    Interest Coverage (TTM) -744.43 2.84 0.33 23.39

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Analyst Recommendations and Revisions

    1-5 Linear Scale

    Current

    1 Month
    Ago

    2 Month
    Ago

    3 Month
    Ago

    (1) BUY 3 3 2 1
    (2) OUTPERFORM 3 3 3 2
    (3) HOLD 0 0 0 0
    (4) UNDERPERFORM 0 0 0 0
    (5) SELL 0 0 0 0
    No Opinion 0 0 0 0
    Mean Rating 1.50 1.50 1.60 1.67

    Source: http://www.reuters.com/finance/stocks/analyst?symbol=KONA.OQ

    Consensus Estimates Analysis

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Sep-11 3 23.61 23.91 23.22 23.20
    Quarter Ending Dec-11 4 23.55 25.00 22.23 22.71
    Year Ending Dec-11 3 96.04 96.67 94.85 91.27
    Year Ending Dec-12 4 102.40 108.50 99.60
    EARNINGS (per share)
    Quarter Ending Sep-11 4 0.03 0.04 0.02 0.01
    Quarter Ending Dec-11 4 0.01 0.03 -0.01 -0.05
    Year Ending Dec-11 4 0.12 0.15 0.08 -0.01
    Year Ending Dec-12 5 0.18 0.19 0.16
    LT Growth Rate (%) 2 24.00 30.00 18.00 24.00

    Technical Analysis

    Source: http://stockcharts.com

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Sept20-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    P.F. Chang’s China Bistro Inc. PFCB 29.29 654.34M 17.93 16.18 0.53 0.51
    McCormick & Schmick’s Seafood Restaurants Inc. MSSR 7.52 111.81M 26.86 22.79 0.32 0.32
    BJ’s Restaurants Inc. BJRI 47.54 1.32B 43.61 35.74 2.15 1.87
    Restaurants Median       17.52 n/a 0.90 n/a
    Kona Grill Inc. KONA 6.73 62.04M 56.08 37.39 0.65 0.61

    Source: Thomson Financial

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