Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: RHB
KFC Holdings (Malaysia) Bhd (KFCH)
(March 30, not traded)
Upgrade to outperform at RM7.85, target price raised to RM9.63: As at end-FY09, KFCH operated 475 KFC restaurant outlets in Malaysia, including 29 drive-through outlets. KFCH management plans to open about 40 new outlets per year in FY10-FY12, including four or five drive-through outlets. We opine that the drive-through outlets are essential, given the rising "on-the-go" lifestyle habits of consumers, especially in urban areas, as well as to maintain its competitiveness against its closest competitor with 37 drive-through outlets. Same store sales (SSS) growth in FY09 in Malaysia improved during 2H09 as consumer sentiment improved, coupled with the festive season and school holidays, which helped to push full-year FY09 SSS growth to about 1% from slight negative growth in the 1H09. The management seems more upbeat on prospects now given that SSS in year to date-Feb FY10 has been growing at a double-digit rate of about 10%, which is significantly above our forecast of 4% per annum for FY10. As such, we are raising our SSS projections to 7% per annum for FY10-FY12, to reflect the better-than-expected YTD SSS growth. KFCH is also adding one outlet in Pune, India, scheduled to be opened today and another in Mumbai on the first week of April. The management indicates that it plans to open circa 10-12 outlets per annum in India, and as such, we have revised our new outlet assumptions for FY10-FY12 in the country to 10-12 per annum from five to 10 previously. We believe the long-term potential for the Indian market continues to be exciting, as we expect growth to be strongly backed by the about 19.1 million combined population in both cities, coupled with potential SSS growth of more than 20% per annum. Given the marked improvement in earnings prospects as the company becomes more aggressive in its growth plans, as well as better growth trajectory from the recovering economy, our fair value has been increased to RM9.63 (based on unchanged 12.5 times FY10 earnings per share (EPS), a 14% discount to consumer sector price earnings of 14.5 times) from RM8.84 previously. Upgraded to outperform from market perform. - RHB Research Institute, March 30
This article appeared in The Edge Financial Daily, March 31, 2010.
Company Name: KFC HOLDINGS (M) BHD
Research House: RHB
KFC Holdings (Malaysia) Bhd (KFCH)
(March 30, not traded)
Upgrade to outperform at RM7.85, target price raised to RM9.63: As at end-FY09, KFCH operated 475 KFC restaurant outlets in Malaysia, including 29 drive-through outlets. KFCH management plans to open about 40 new outlets per year in FY10-FY12, including four or five drive-through outlets. We opine that the drive-through outlets are essential, given the rising "on-the-go" lifestyle habits of consumers, especially in urban areas, as well as to maintain its competitiveness against its closest competitor with 37 drive-through outlets. Same store sales (SSS) growth in FY09 in Malaysia improved during 2H09 as consumer sentiment improved, coupled with the festive season and school holidays, which helped to push full-year FY09 SSS growth to about 1% from slight negative growth in the 1H09. The management seems more upbeat on prospects now given that SSS in year to date-Feb FY10 has been growing at a double-digit rate of about 10%, which is significantly above our forecast of 4% per annum for FY10. As such, we are raising our SSS projections to 7% per annum for FY10-FY12, to reflect the better-than-expected YTD SSS growth. KFCH is also adding one outlet in Pune, India, scheduled to be opened today and another in Mumbai on the first week of April. The management indicates that it plans to open circa 10-12 outlets per annum in India, and as such, we have revised our new outlet assumptions for FY10-FY12 in the country to 10-12 per annum from five to 10 previously. We believe the long-term potential for the Indian market continues to be exciting, as we expect growth to be strongly backed by the about 19.1 million combined population in both cities, coupled with potential SSS growth of more than 20% per annum. Given the marked improvement in earnings prospects as the company becomes more aggressive in its growth plans, as well as better growth trajectory from the recovering economy, our fair value has been increased to RM9.63 (based on unchanged 12.5 times FY10 earnings per share (EPS), a 14% discount to consumer sector price earnings of 14.5 times) from RM8.84 previously. Upgraded to outperform from market perform. - RHB Research Institute, March 30
This article appeared in The Edge Financial Daily, March 31, 2010.
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