Collins Foods Limited

FY19 Same Store Sales Growth at 3.7% for KFC Australia: Collins Foods Limited (ASX: CKF) is engaged in the operation, management and administration of restaurants across geographies such as Australia, Europe and Asia.

FY19 Highlights for the period ending 30 June 2019: Collins Foods Limited declared its full-year results for FY19, wherein the company reported revenue at $901.2 million, up 16.9% on y-o-y basis while reported NPAT at $39.1 million, up 20.3% from FY18. The company reported an EBITDA of $112.2 million as compared to $89.6 million during FY18. During the year, the business included 70 restaurants across the network, providing a home delivery service. During the year, the company built seven new restaurants and closed two outlets. In KFC Europe, Germany witnessed a positive turnaround, driven by the introduction of value and snacking as permanent layers that were supported by a national brand refresh. In Europe, the company introduced 4 restaurants during FY19. For KFC Australia, same store sales growth stood at 3.7%, driven by innovative products and strong value offering. Sizzler in Australia posted a growth of 4.4% in terms of Same Store Sales growth while overall revenue was down 8% on y-o-y basis, primarily driven by fewer presence in the country. Royalty revenue increased 12.2% y-o-y in Sizzler Asia on account of 5 new restaurant openings and strong value offer.


FY19 Financial Highlights (Source: Company Reports)

CKF has distributed a fully franked dividend of AUD 0.10500 on 25 July 2019. At CMP of $10.44, the annualised dividend yield of the stock stands at 1.96%.

Outlook: As per the guidance provided by the Management, the company is likely to open nine to ten restaurants in FY20, including four to five restaurants across Europe. The company is targeting to expand its existing delivery network by rolling out and testing digital initiatives such as digital menu board implementation in the coming quarters.

Stock Recommendation: The Stock of CKF is quoting at $10.440 with a market capitalization of ~$1.16 billion. The stock is trading at the upper band of its 52-week trading range of $5.97 to $10.47. The stock has generated healthy returns of 19.47% and 37.29% during the last three months and six-months, respectively. The stock price has corrected 1.58% in the last five days (as on 04 October 2019) while the stock has generated a return of 12.06% in the last one month. The stock is available at a price to earnings multiples of 29.61x on trailing twelve months basis (TTM), which is higher than the industry median of 13.1x. Enterprise value to sales multiple of the stock stands at 1.5x on TTM basis as compared to the industry median of 1.2x. The company has reported a net margin of 4.3% during FY19 as compared to the industry median of 8.9% while the operating margin stood at 7.7% as compared to the industry median of 14.4%. Considering the aforesaid facts, stock-price movement, valuation and profitability margins, we recommend an “Expensive” rating on the stock at the current market price of $10.440, up 5.03% as on 08 October 2019.
 

Accent Group Limited

Higher Product Penetration Aided Business Growth: Accent Group Limited (ASX: AX1) operates in the sale of branded performance and lifestyle footwear to customers. The major sources of the Group’s revenue include sales to customers, royalties and other franchise related income and marketing levies received from TAF (The Athlete’s Foot) stores. Recently, AX1 notified that one of its directors, Michael John Hapgood disposed 530,455 ordinary shares via on-market trade during 2 October 2019 to 4 October 2019.

FY19 Performance Highlights for the period ending 30 June 2019:  AX1 declared its full-year results for FY19 wherein the company posted Group Sales of $772.5 million, up 14.3% on prior year and NPAT of $53.9 million as compared to $44 million on FY18. Top-line growth was majorly driven by 93% y-o-y growth in digital sales. During the year, the Company witnessed opening of 54 new stores and 21 closed outlets. AX1 reported gross margin at 56.1%, up 130 bps from FY18, driven by improved product penetration in the vertical brand and margin improvement in TAF. The company opened Platypus Flagship superstores in Melbourne Central and Pitt Street during the year, followed by a new Subtype Melbourne store, opened during April 2019. The business witnessed a strong inventory clearance program during June 2019, which resulted in the lowest levels of aged inventory and lower margin during the second half of FY19.
 

FY19 Financial Highlights (Source: Company Reports)

The company distributed a fully franked dividend of AUD 0.03750 on 26 September 2019. At the current market price (CMP) of $1.690, the annualised dividend yield of the stock stands at 4.93%.

Outlook: The Management expects to have at least 65 corporate stores by the end of FY20, followed by $15 million of sales during FY20. The company targets digital sales to represent 20% of total sales within the next 3 years.

Stock Recommendation: The stock of AX1 is trading at $1.690 with a market capitalization of ~$906.58 million. The stock is currently trading close to the upper band of its 52-week trading range of $1.050 to $1.765. The stock has generated a decent return of 11.30% and 14.73% in the last three-months and six-months, respectively. The company has delivered a decent set of numbers during FY19 and intends to deliver its growth plan objectives, aided by the improvement in gross margin and new store rollouts in the coming quarters. Hence, considering the aforesaid factors, price movements, business prospects, etc., we recommend a “Hold” rating on the stock at the current market price of $1.690, up 0.896% as on 08 October 2019.

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.