Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: OSK
KFC Holdings (Malaysia) Bhd
(Aug 25, RM10.58)
Maintain neutral at RM10.70 with higher target price RM10.30 (from RM9.17): KFCH's 1HFY2010 net profit and revenue of RM69.97 million and RM1.2 billion respectively were well in line with our and consensus estimates, coming in at 48.6% of our full-year forecast. While quarter-on-quarter (q-o-q) revenue was flat, its net profit shows slight improvement by 4.3% growth. Year-on-year (y-o-y) earnings were stronger at 15.9%. Cumulative earnings before interest and tax margins improved slightly to 11.5% from 11.4% previously.
Comparing KFCH restaurants on a y-o-y basis, we note decent operating profit growth of 14.1%. We believe the robust growth was driven by the introduction of new products and promotional items such as Colonel's Royal Briyani Combo, Iron Man 2 movie tie-ups and Shrimp Hearties. Fifteen new restaurants were also opened during the quarter. Additionally, its Singapore operations also saw a q-o-q increase of 7.4% in operating profit mainly attributed to value products and new products including the Ultimate Value Box meal and egg tarts. Aside from that, integrated poultry registered improved sales by 8.8% with increasing sales of Ayamas products to the local open market and export market.
As KFC Malaysia has opened its first two new stores in Pune and Mumbai in April and June, it is now targeting to open another 12 outlets in India by year-end to capture further market share in the fast food business. We think India is the next growth catalyst for the group, given that the Malaysian market is saturated and could potentially accommodate only another 200 to 300 new restaurants.
As KFC is looking at opening another 12 outlets in India, we see potential earnings contribution coming from India. As such, we raise our earnings forecasts for FY2011 by 3% from RM158.2 million to RM162.9 million. Given that most food counters have re-rated to a trading range of 12 to 13 times, we also increase our valuation PER from 11.4 times to 13 times, translating to a new target price of RM10.30 from RM9.17 previously. We maintain our neutral recommendation. ' OSK Investment Research, Aug 25
This article appeared in The Edge Financial Daily, August 26 2010.
Company Name: KFC HOLDINGS (M) BHD
Research House: OSK
KFC Holdings (Malaysia) Bhd
(Aug 25, RM10.58)
Maintain neutral at RM10.70 with higher target price RM10.30 (from RM9.17): KFCH's 1HFY2010 net profit and revenue of RM69.97 million and RM1.2 billion respectively were well in line with our and consensus estimates, coming in at 48.6% of our full-year forecast. While quarter-on-quarter (q-o-q) revenue was flat, its net profit shows slight improvement by 4.3% growth. Year-on-year (y-o-y) earnings were stronger at 15.9%. Cumulative earnings before interest and tax margins improved slightly to 11.5% from 11.4% previously.
Comparing KFCH restaurants on a y-o-y basis, we note decent operating profit growth of 14.1%. We believe the robust growth was driven by the introduction of new products and promotional items such as Colonel's Royal Briyani Combo, Iron Man 2 movie tie-ups and Shrimp Hearties. Fifteen new restaurants were also opened during the quarter. Additionally, its Singapore operations also saw a q-o-q increase of 7.4% in operating profit mainly attributed to value products and new products including the Ultimate Value Box meal and egg tarts. Aside from that, integrated poultry registered improved sales by 8.8% with increasing sales of Ayamas products to the local open market and export market.
As KFC Malaysia has opened its first two new stores in Pune and Mumbai in April and June, it is now targeting to open another 12 outlets in India by year-end to capture further market share in the fast food business. We think India is the next growth catalyst for the group, given that the Malaysian market is saturated and could potentially accommodate only another 200 to 300 new restaurants.
As KFC is looking at opening another 12 outlets in India, we see potential earnings contribution coming from India. As such, we raise our earnings forecasts for FY2011 by 3% from RM158.2 million to RM162.9 million. Given that most food counters have re-rated to a trading range of 12 to 13 times, we also increase our valuation PER from 11.4 times to 13 times, translating to a new target price of RM10.30 from RM9.17 previously. We maintain our neutral recommendation. ' OSK Investment Research, Aug 25
This article appeared in The Edge Financial Daily, August 26 2010.
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