Collins Foods Limited (ASX: CKF)

CKF Details

Continuing to grab market opportunities - Collins Foods Limited is engaged in the operation, management and administration of restaurants and operates in three segments KFC Restaurants, Sizzler Restaurants and Shared Services. During the first half of the year FY18, the group has completed acquiring five out of 28 KFC restaurants from Yum! Based on ongoing development related to expanding footprints in Asia region and increased store counts over the period, CKF is expected to witness growth in years to come. It is expected that it will further open two more stores in this calendar year. The Group also owns few of its outlets in the Netherlands and Germany.


Sales and EBITDA margin Trend (Source: Company Reports)

Further, the group has recently launched the first Taco Bell Restaurant in Queensland and it traded well which is above expectations. The Group recorded a revenue of $633.56 million which was up by 10.32 per cent as compared to the previous year. It reported a dividend of 0.17 AUD for 2017 which represented a 22.08 per cent of increase from over last year. This positive trend, especially of dividend, is worth to watch out as only some companies in the Restaurants industry pay a decent dividend. The Group is advancing in European markets and is executing its transformation plan in Germany. It is integrating its Netherland business and is building a strong and efficient back office to support the European business. Then Net leverage ratio for HYFY18 was 1.55 and is expected to be around 2.1 at the year-end after taking into the impact of the acquisition of Australian KFC.

It is expected that the Group will revitalize due to the increase in the demand of its products as soccer fans will be tempted for a nice bucket of fried chicken to eat while watching FIFA World Cup matches. It is looking forward to open more of its Taco Bell outlets in FY2018 as it received positive feedbacks after reviewing and evaluating its brand acceptance among the masses in the market. There was an increase in the transaction from its KFC Application and it recorded 13,000 transactions each week. The sales from its Sizzle Restaurants was also growing in Asia and it opened its 3 new stores during the first half of 2018. The stock price has been moving in an upward direction for one year but has gradually fallen since past five days. Since the Group is in a growing stage and with the upcoming FIFA event, it is expected that the stock will get a boost which makes it more attractive. We recommend to “Buy” the stock at the current market price of $5.52.
 

CKF Daily Chart (Source: Thomson Reuters)

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