Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
Research House: AMMB
KFC Holdings (M) Bhd
(March 3, RM3.66)
Maintain buy at RM3.65 with fair value of RM4.15: According to Bernama, fast-food chain McDonald's Malaysia (McD) is forecasting a robust 20% year-on-year (y-o-y) growth in sales to RM1.3 billion for 2011, from just RM1 billion in the pre-vous year.
McD is estimated to command some 20% to 30% market share of the local fast and casual food arena; thus we see the optimistic view as a good gauge of industry prospects. This underscores our positive stance on closest competitor KFC Holdings (KFCH) for the strong food consumption trend in Malaysia, with same store sales (SSS) growth in FY11F expected to remain steady at 8% to 9%. Market share of McD and KFCH combined is believed to be 55% to 60%.
McD recently launched a new product called the 'Family Breakfast Box' as part of the extension to existing breakfast offerings. As the name suggests, the product is designed for two to four persons, with two options priced at either RM19.90 per set or RM24.90 per set.
Admittedly, with savings of up to RM11.15 compared with a la carte purchases, the Family Breakfast Box does look attractive. However, we see an insignificant impact on KFCH, as breakfast sales constitute a mere 2% to 3% to KFCH's total revenue. In contrast, breakfast contributes an estimated 25% to 30% to McD's turnover.
Moving forward, integrated poultry margins, which have been relatively flattish so far, could see some slight pressure due to rising raw material costs such as corn and potatoes. But this should be partially offset by the strong ringgit against the US dollar. The group last raised average selling prices by 2% to 3% back in 2007 during the commodities bull run.
We maintain 'buy' with an unchanged fair value of RM4.15 per share, based on a fair price-earnings ratio of 20 times FY11 earnings. We like KFCH for its high-cash generating food business model on the back of stable restaurant sales in Malaysia and exciting earnings growth potential in India. ' AmResearch, March 3
This article appeared in The Edge Financial Daily, March 4, 2011.
Company Name: KFC HOLDINGS (M) BHD
Research House: AMMB
KFC Holdings (M) Bhd
(March 3, RM3.66)
Maintain buy at RM3.65 with fair value of RM4.15: According to Bernama, fast-food chain McDonald's Malaysia (McD) is forecasting a robust 20% year-on-year (y-o-y) growth in sales to RM1.3 billion for 2011, from just RM1 billion in the pre-vous year.
McD is estimated to command some 20% to 30% market share of the local fast and casual food arena; thus we see the optimistic view as a good gauge of industry prospects. This underscores our positive stance on closest competitor KFC Holdings (KFCH) for the strong food consumption trend in Malaysia, with same store sales (SSS) growth in FY11F expected to remain steady at 8% to 9%. Market share of McD and KFCH combined is believed to be 55% to 60%.
McD recently launched a new product called the 'Family Breakfast Box' as part of the extension to existing breakfast offerings. As the name suggests, the product is designed for two to four persons, with two options priced at either RM19.90 per set or RM24.90 per set.
Admittedly, with savings of up to RM11.15 compared with a la carte purchases, the Family Breakfast Box does look attractive. However, we see an insignificant impact on KFCH, as breakfast sales constitute a mere 2% to 3% to KFCH's total revenue. In contrast, breakfast contributes an estimated 25% to 30% to McD's turnover.
Moving forward, integrated poultry margins, which have been relatively flattish so far, could see some slight pressure due to rising raw material costs such as corn and potatoes. But this should be partially offset by the strong ringgit against the US dollar. The group last raised average selling prices by 2% to 3% back in 2007 during the commodities bull run.
We maintain 'buy' with an unchanged fair value of RM4.15 per share, based on a fair price-earnings ratio of 20 times FY11 earnings. We like KFCH for its high-cash generating food business model on the back of stable restaurant sales in Malaysia and exciting earnings growth potential in India. ' AmResearch, March 3
This article appeared in The Edge Financial Daily, March 4, 2011.
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