Its their Cash Flow Statement that is concerning. Operating cash...

Its their Cash Flow Statement that is concerning.

Operating cash flow: +3.4 million

While PPE in investing cash flows, unavoidable to keep a business running, costs them over $16 mil each half.

The media hatchet job you mentioned is meaningful to the bottom line, whether its true or not. People do believe what they read and potential franchisees will be staying well clear for some time. This is problematic because RFG's last half still included cash flows from new franchisees will have since dried up.

So rationally it looks like trouble to me.

Now lets examine your claim that this is "rationally" cheap. Looking at the profit and loss, adding back in the write downs, subtracting the tax credit and applying 30% tax rate to the new 'underlying' profit gives $9mil for the half or $18 mil for the year at best. Remember that the effects of the bad press aren't really reflected in this report, so its likely going to be worse than $18 mil. Anyway, this implies a PE of 12. Thats not exactly cheap for a risky play with down side now is it? There's certainly safer plays aplenty in the retail space for lower PEs than that, if its value you are looking for.