Collins Foods ( CKF)
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.