Collins Foods ( CKF)

Townsville Bulletin - - NEWS - Jason Fit­tler, Grow Your Wealth

COLLINS Foods is the largest KFC fran­chisee in Aus­tralia, with out­lets mainly in Queens­land and Western Aus­tralia. As the owner of the Siz­zler trade­marks in more than 68 coun­tries, Collins also re­ceives roy­al­ties from Siz­zler restau­rants in Asia, in ad­di­tion to rev­enue from a num­ber of com­pa­nies op­er­at­ing Siz­zler restau­rants in Queens­land, Western Aus­tralia and NSW.

CKF’s KFC stores are per­form­ing strongly. The com­pany con­tin­ues to in­vest in ma­jor re­fur­bish­ments and will now in­crease its new store roll­out to 8 pa. The com­pany has a great year with the share price up around 25 per cent and forecast div­i­dend of 7 per cent gross for 2016 fi­nan­cial year. Siz­zler has been de­clared “non- core” af­ter years of un­der­per­for­mance which may lead to some down­side in the share price due to the costs of wind­ing down this side of the busi­ness.

An up­side sce­nario would likely in­volve an in­creased roll­out of KFC stores and po­ten­tial ac­qui­si­tion or launch of a sec­ond ma­jor brand. How­ever, given the good re­sult by the com­pany and the un­cer­tainty of fu­ture head winds, this would be a good com­pany to take some prof­its on. At present it is look­ing fully val­ued with risks to the down­side, the div­i­dend is at­trac­tive along with fu­ture div­i­dend growth but risk of loss of cap­i­tal in the short term may out­weigh div­i­dend re­turns.

This in­for­ma­tion is gen­eral. Prospec­tive in­vestors should con­sider their own ob­jec­tives, fi­nan­cial sit­u­a­tion and needs.

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