CIMB reiterates outperform on QSR

Tags: Brokers Call | Cambodia | CIMB Research | India | QSR Brands Bhd

Written by Financial Daily
Tuesday, 20 October 2009 10:33

CIMB Research has maintained its outperform call on QSR BRANDS BHD [] at RM3.44 with a target price of RM5.84, based on higher average ticket prices and success in new markets, namely Cambodia and India, where more outlets will be opened.

The research house’s valuation basis is pegged to unchanged forward price/earnings (P/E) of 16 times having factored in a 10% discount to the average valuation of bigger food and beverage (F&B) producers, namely Nestle Bhd and FRASER & NEAVE HOLDINGS BHD [].

“QSR is our top pick in the F&B sector,” it said in a research note yesterday. “Given the improvement in sales in 2H, we are confident that QSR is on track to meet our forecasts. It remains an attractive growth story with a three-year EPS CAGR (earnings per share compound annual growth rate) of 11.9%.”

It added that investors with a higher risk appetite could opt for the 40.9 million free detachable warrants (one warrant for every six QSR shares) which were issued on March 6, 2008 that will expire on March 5, 2013 at a strike price of RM3.01.

Citing QSR management, CIMB Research reported that the brand is making headway in India where 50.3%-owned KFC Holdings is preparing for the opening of three outlets by year-end.

Two outlets are slated to open in Mumbai, with expected average monthly sales of US$80,000 (RM270,400) and one in Pune, with expected average monthly sales of US$60,000.

The outlets in India are expected to be profitable in about three years’ time. There are currently four KFC outlets in Mumbai and two in Pune.

CIMB Research also reported that sales for QSR brands, which include Pizza Hut, KFC, Rasamas and Kedai Ayamas have gathered strength in 2H09 following a marginal 1% rise in net profit to RM42 million in 1H09.

“September is so far the best month in terms of sales, thanks to Pizza Hut’s Sensasi Delight promotions and KFC’s Ramadan value meals, both of which were priced under RM10 per serving,” it said, adding that the Sensasi Delight promotion contributes to about 30% of Pizza Hut sales.

At yesterday’s close, QSR rose two sen to RM3.46.