Cake Box (LON: CBOX) is the UK's leading fresh cream celebration cake retailer, and I think it's a pretty interesting small cap right now. Store count grew from 113 to 276 between FY19 and FY26, revenue went from £16.9M to £45.9M (£59.9M if last year's acquisition is included), and it runs on a franchise model where franchisees fund the store openings themselves, which makes the business very capital-light and cash generative. It's trading at a P/FCF of just 10.5 with a 5.5% dividend yield.
There's still a lot of room to grow. Management has a target of 400 UK stores, up from 276 today, and has just opened its first international store in Paris, with more markets under consideration. On top of that, last year's £22M acquisition of Ambala, an Asian mithai/sweets retailer, adds another growth lever. The plan is to run Ambala through the same franchise playbook that worked for Cake Box, and margins there are already improving.
I did a sum-of-the-parts valuation and land at a fair value of around £3/share, with an expected annual return somewhere between 12% and 19% depending on the scenario, dividend included.
Wrote up the full thesis with all the numbers, franchise economics, and the risks I see here.
Not financial advice, just sharing my own research. Happy to discuss in the comments.
