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Are Retail Food Group Limited shares too cheap to ignore after today’s update?

In morning trade the Retail Food Group Limited (ASX: RFG) share price is flat at $4.40 following the release of an update on its business-wide review.

According to the release, after receiving a number of enquiries management has decided to provide additional information regarding the company review, its scope, and the outcomes it is expected to produce.

A key aspect of the 24-month project is a focus on its domestic franchise operations to ensure that its strategic business model are appropriate for a retail market which remains challenging. This is particularly the case for shopping centre tenants.

Numerous other initiatives, including investment in business intelligence, digital capability, product innovation, retail design, field service support, and supply chain improvements, have already been implemented with the aim of driving improved domestic franchise outcomes.

Finally, measures to inform, support, and educate franchisees to ensure they are aware of their obligations as employers are also in place now.

Management intends to provide further updates on the review in future half-year and full-year reports and took this opportunity to reaffirm its FY 2018 underlying NPAT growth guidance of circa 6%.

Should you be buying Retail Food Group’s shares?

Considering its full-year guidance I think the food and beverage company’s shares are cheap at just 10x trailing earnings. As well as this, with a trailing fully franked 6.7% dividend on offer with its shares, it could be a good option for income investors.

While I’m not a big fan of all of its businesses, I am optimistic that this business review will lead to improvements in its underperforming businesses or perhaps even their divestment.

This could make it worth considering as an investment alongside industry peers Domino’s Pizza Enterprises Ltd. (ASX: DMP) and Collins Foods Ltd (ASX: CKF).

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Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia owns shares of Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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