KFC Holdings - What's for dinner? BUY

Stock Name: KFC
Company Name: KFC HOLDINGS (M) BHD

Research House: AMMB

Price Call: BUY

Target Price: 4.15

McDonalds' Malaysia (McD) recently unveiled 'McValue Dinner'combo meals, targeted at dinner crowds. Essentially, 'McValue Dinner' isan  extension of McD's long-running 'McValueLunch' promotion.

We note that both promotions offer same discounts of up to36% off the respective standard combo prices. The difference is that the 10selected combo meals are now also available from 6pm-9pm, daily, albeit for alimited time only.

While 'McValue Dinner' is not new, we observed that thepromotion is normally conducted in conjunction with the Hari Raya Puasa period.

We are not too concerned about this latest development.Marketing push by operators via new product launches and value propositions isin line with industry practice, especially during 1H given the lack of majorfestivities.

We expect an insignificant impact on KFC restaurant salesover the long run, though dinner sales volume could soften in the short term.We take comfort that KFC Holdings (KFC) retains a dominant market share of dinnerticket sales among the operators. Dinner sales constitute an estimated 30%-35%of KFC's group turnover.

We are keeping our earnings forecast unchanged, underpinnedby our assumption of 36 additional KFC stores for FY12F. The group openedequivalent new KFC stores across Malaysia, Singapore, Brunei and India lastyear.

Maintain BUY with an unchanged fair value of RM4.15/share,based on a fair PE of 18x FY13F earnings. We like the group's high cashgenerative food business model on the back of an established global brandequity, with stable restaurant sales in Malaysia and exciting growth prospectsin India. 

Source: AmeSecurities