Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD
KFC Holdings (M) Bhd
(Oct 6, RM3.19)
Maintain hold at RM3.20 with a revised target price of RM3.37 (from RM3.97): Slower economic growth is likely to have some dampening effect on consumption demand. Therefore, we have lowered our same-store-sales growth assumption by 0.5 percentage point for 2012'' to 1.3% and 1.5% for 2013 and trimmed our profit forecasts for 2012 and 2013 by 5% each year. Our discounted cash flow-based target price is cut to RM3.37 from RM3.97 on lower earnings and a higher cost of equity of 8.6% from 7.9% previously on account of higher economic risks. Valuations are still not appealing, with KFCH trading at a prospective 2012 price-earnings ratio (PER) of 14.2 times and dividend yields of just 2.1%.
The group has closed 10 non-performing Rasamas outlets year-to-date, taking the number of outlets down to 29 from 39 as at end-2010. Rasamas' contribution to the group's total revenue has dropped from 1.2% in 2008 to just 1% in 2010. The 534 domestic KFC outlets have continued to perform.The average ticket has surpassed RM20 to RM21.50 with the introduction of new products, promotions, and improvements at its drive-through windows.
While the management is targeting 28 new outlets in India in 2011, we have factored in 23. The management's intention is to have 15 restaurants by end-2011 (nine presently) and 30 restaurants by end-2012. Breakeven is expected at around 25 outlets, and is likely to happen only in 2013. As at end-2010, India contributed 3.3% of total revenue in the restaurant segment, compared with 79% of the operations in Malaysia.
KFCH's price-to-book valuation at the lowest point during the global financial crisis in 2008 was 1.6 times, against 2.3 times for 2011 presently. Based on our estimated book value per share of RM1.56 for 2012, the estimated trough in share price would be about RM2.50. KFCH traded at a trough PER of about nine times, against 14.8 times presently. Our base case has factored in slower economic growth but not a recession. We do not expect trough valuations to be revisited. ' Maybank IB Research, Oct 6
This article appeared in The Edge Financial Daily, October 7, 2011.
Company Name: KFC HOLDINGS (M) BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 3.37 |
KFC Holdings (M) Bhd
(Oct 6, RM3.19)
Maintain hold at RM3.20 with a revised target price of RM3.37 (from RM3.97): Slower economic growth is likely to have some dampening effect on consumption demand. Therefore, we have lowered our same-store-sales growth assumption by 0.5 percentage point for 2012'' to 1.3% and 1.5% for 2013 and trimmed our profit forecasts for 2012 and 2013 by 5% each year. Our discounted cash flow-based target price is cut to RM3.37 from RM3.97 on lower earnings and a higher cost of equity of 8.6% from 7.9% previously on account of higher economic risks. Valuations are still not appealing, with KFCH trading at a prospective 2012 price-earnings ratio (PER) of 14.2 times and dividend yields of just 2.1%.
The group has closed 10 non-performing Rasamas outlets year-to-date, taking the number of outlets down to 29 from 39 as at end-2010. Rasamas' contribution to the group's total revenue has dropped from 1.2% in 2008 to just 1% in 2010. The 534 domestic KFC outlets have continued to perform.The average ticket has surpassed RM20 to RM21.50 with the introduction of new products, promotions, and improvements at its drive-through windows.
While the management is targeting 28 new outlets in India in 2011, we have factored in 23. The management's intention is to have 15 restaurants by end-2011 (nine presently) and 30 restaurants by end-2012. Breakeven is expected at around 25 outlets, and is likely to happen only in 2013. As at end-2010, India contributed 3.3% of total revenue in the restaurant segment, compared with 79% of the operations in Malaysia.
KFCH's price-to-book valuation at the lowest point during the global financial crisis in 2008 was 1.6 times, against 2.3 times for 2011 presently. Based on our estimated book value per share of RM1.56 for 2012, the estimated trough in share price would be about RM2.50. KFCH traded at a trough PER of about nine times, against 14.8 times presently. Our base case has factored in slower economic growth but not a recession. We do not expect trough valuations to be revisited. ' Maybank IB Research, Oct 6
This article appeared in The Edge Financial Daily, October 7, 2011.
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