COLLINS FOODS LIMITED 

CKF has recently announced that it has entered into a development agreement with Taco Bell; and under this agreement, it will roll out more than 50 new Taco Bell restaurants across multiple states in Australia between January 1, 2019 and December 31, 2021.This will be funded from internally generated cash flows.

Healthy Financials:80% rise in the operating cash flow has been reported in the last 5 years. 125% upside was posted in terms of the dividend payment during the last 5 years. Net leverage ratio was reported at 2.75. Company expects NLR to fall below 2 over the period of next year. 96% revenue was posted by KFC Australia over the span of 5 years. The revenue growth was backed by 58% growth in acquisitions and 38% growth in system sales. EBITDA from KFC Australia has grown by 122% over 5 years driven by new productivity initiatives. Positive returns were recorded from the portfolio during the quarter.

Strong Market presence along with Strong portfolio: CKF accounts for 35% of Yum! It has acquired around 83 restaurants under 3 separate deals in the past 5 years with 42 restaurants in WA in FY14, 13 restaurants in NSW in FY16 and 28 restaurants in WA, SA and Tasmania in FY18. Since the start of FY13, it has built 31 new restaurants. Company expects to build and increase its portfolio with further development of 809 restaurants each year and reaching up to 40-45 restaurants in the period of next 5 years.

Technically,the scrip is forming higher high on the price charts. Major indicators like relative strength indicator signal for the bull run to continue. With no signals of reversal on the price charts and indicators pointing towards upside, the stock looks interesting.

The market cap of CKF was recorded $742.18m, with P/E of 22.52x as on October 31. At current juncture scrip is trading at the price levels of $ 6.41. Healthy financials with strong product portfolio and market presence, along with current price levels trading indicate higher high formation on the charts. We maintain “Buy” recommendation on the scrip at the current price levels of $6.41.
 

MAGELLAN GLOBAL TRUST

Strong Portfolio with exposure to varied sectors:  MGG portfolio has exposure to varied sectors, with insurance sector contributing 1%, 3% contributed by the infrastructure sector, 20% in cash, 18% by the consumer defensive, 9% by the health care, information technology contributing 14%, internet and e commerce contributing 17%. The stocks that have performed well were HCA Healthcare, Apple and Lowe’s. Rally in HCA was seen after the hospital chain in US reported higher than expected profits and revenues for the second quarter and raised its guidance for the full year driven by increase in patient numbers and increment in higher paying procedures. Apple rallied after the consumer technology company posted higher than expected earnings for the third quarter and boosted its sales forecast for the quarter driven by high demand for iPhone and other services.

Lowe’s recorded rise after report on simplification on the company's operations and attempt to lift the store productivity and improve service levels and boost longer term returns were indicated.

Strong portfolio comprising of good stocks from varied sectors is a key point for the trust performance in the long term.

Technically,the scrip formed a “Doji” like pattern on October 26, and made a high of $1.66. Once these levels are continually breached more upside can be seen on the scrip. Major indicators like RSI indicate upside move in the near term.
The market cap of MGG was recorded $ 1.75 bn, P/E of 9.86 x as on October 31.At current juncture, scrip is trading at the price levels of $ 1.68. Strong portfolio, along with current price levels trading near previous high and no reversal candle formed on technical charts, exhibit an investment opportunity. We maintain a “Buy” recommendation on the scrip at the current price levels of $ 1.68.
 
 

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