We were recently in Mumbai where KFC India is preparing to open its third outlet. It plans to own 30 outlets by 2012 and may acquire Yum!’s five outlets by year-end. The existing two outlets generate monthly sales average of RM450,000/outlet and may turn profitable in three years. As much as we like KFCH’s venture in India, we reiterate our view that QSR offers a cheaper entry into the KFC business.
We maintain our earnings forecasts but raise our target price from RM5.60 to RM5.88 as we roll it forward to end-CY11. We continue to base it on 16x forward P/E, a 10% discount to the average valuation of bigger F&B producers. QSR remains our top F&B pick and a BUY, with the potential re-rating catalysts being 1) success in new markets, 2) M&A, and 3) further improvement in average ticket prices.
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