Priszm Income Fund (TSE:QSR.UN)

Priszm Income Fund (TSE:QSR.UN) is a Canadian income trust that has an interest in KFC, Pizza Hut, and Taco Bell restaurants in Canada.

Priszm started to lose money in 2007 and went through a restructure exercise where they suspended distributions for awhile, started selling money losing restaurants, and then restarted distributions eventually but at a lower rate.

In 2nd quarter of 2008 they started to see a turn around. Same store sales growth (SSSG) returned to positive territory. They shifted from a net loss to a net profit position. They stated they're going to continue to sell poor performing locations and focus on multi-branded restaurants (i.e. combined KFC/Taco Bell locations where they have two restaurants in one)which continue to show stronger SSSG over traditional one-brand restaurants. This turn around was positive in that it also took place during a period of economic hardship.

Another strong sign is they've issued an announcement in August 2008 that they intend to start purchasing back shares. Perhaps they are using the cash from the sales of their poor performing locations to do this share repurchase. Using the cash this way, or investing it into more multi-branded locations would both be positive use of cash they receive from their restaurant sales.

Now with the recent market crash in September, Priszm's share price is trading around $2.80 today (Oct 1st 2008). With their distributions set at 5 cents per month (60 cents per year) that gives you a 21.43% yield.

All of the above makes this an attractive investment opportunity to me. I'm continuing to purchase Priszm Income Trust units while their price remains under $3.00.

But there are some cavaets.
(1) While QSR.UN used to be perhaps a Small Cap years ago, it's market capitalization has now shrunk to perhaps a Micro Cap. This being such a small company, the average daily trading volume is low. So it makes it difficult to purchase or sell a large amount at one time without experiencing price volatility.

(2) QSR.UN has only just recently returned to profitability. They only have the one 2nd quarter 2008 positive results under their belt. It may be too early to tell if that quarter was an optimistic blip on their previous downward trend, or if it was truly the start of a company turn around.