Citi starts coverage of Australia's Collin Foods; sees EBITDA to double by FY31

Collins Foods

06/08/2023 22:48

** Citi initiates coverage on Australia's Collins Foods  CKF.AX , sets a
"Buy" rating with a price target of A$12.80 per share  
    ** Citi estimates co's earnings before interest, tax, depreciation and
amortisation to almost double by A$407 million ($267.40 million) by FY31
starting from current FY on account of rollout of KFC in the Netherlands and
Australia.
    ** The broker also forecasts co’s network of KFC stores in Europe to more
than double by FY31, as it believes KFC is significantly under-penetrated
relative to other major fast-food chains in Europe 
    ** Brokerage says strength of the KFC brand globally will help drive sales
for co in an uncertain environment, with other short-term risk arising such as
uncertainty around success of brand rival Taco Bell, among others
    ** However, the broker flags near-term headwinds for FY24 EBITDA in the form
of cost pressures from food and labour, which could put pressure on the company
to raise menu prices, leading to deceleration in same-store sales growth 
    ** Four of nine analysts rate the stock "buy" or higher, five "hold," and
none "sell" or lower; their median PT is A$10.10 – Refinitiv data
    ** Stock has risen ~40.8% this year, as of last close


($1 = 1.5221 Australian dollars)

 (Reporting by Archishma Iyer in Bengaluru; Editing by Leslie Adler)
 ((Archishma.Iyer@thomsonreuters.com;))