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Collins Foods Ltd CKF

Morningstar Rating
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Stock XASX Rating as of
A$9.72 −0.16 (1.62%)
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As of Delayed Price Closed
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Company Report

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Australian Retailing: Discretionary Sector Rallying on Overblown Tailwinds

Johannes Faul

Talk of interest rate cuts and impending tax cuts is sparking a rally in consumer cyclicals. We agree these factors improve the near-term outlook for consumer spending, with cyclical retailers more exposed. We expect the combined impact of fiscal and monetary tailwinds to underpin mid-single-digit growth in total retailing sales in the medium term—compared with our estimate of only 2% growth in fiscal 2024. But underlying our near-term forecast is a significant divergence across categories, with sales in cyclicals virtually flat and defensives up 4%.

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Price vs Fair Value

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CKF is trading at a 32% discount.
Price
A$9.72
Fair Value
A$15.30
Uncertainty
High
1-Star Price
A$12.29
5-Star Price
A$8.73
Economic Moat
Yxnbp
Capital Allocation
Sqmtmqyl

Bulls Say, Bears Say

Bulls

The KFC brand is relatively underpenetrated in mainland Europe. There is potential for Collins Foods to both grow its existing European operations and to expand into other countries.

Bears

Organic growth potential for the core Australia business, over and above population growth, is capped by the relative maturity of the KFC brand in Australia.

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Trading Information

Previous Close Price
A$9.88
Day Range
A$9.57–9.84
52-Week Range
A$7.50–12.55
Bid/Ask
A$9.70 / A$9.83
Market Cap
A$1.14 Bil
Volume/Avg
409,869 / 380,384

Key Statistics

Price/Earnings (Normalized)
24.07
Price/Sales
0.83
Dividend Yield (Trailing)
2.73%
Dividend Yield (Forward)
2.48%
Total Yield
2.73%

Company Profile

Collins Foods is an operator of quick service restaurants, or QSRs. It franchises restaurant brands from U.S.-listed Yum Brands, including KFC in Australia, Germany, and the Netherlands, as well as Taco Bell in Australia. Most of its revenue and earnings are generated in Australia, where Collins is the largest franchisee of KFC, ahead of Restaurant Brands New Zealand.In the Netherlands, Collins has signed a corporate franchise agreement, giving it more control over development and oversight of the Dutch franchisee network.Earnings growth is underpinned by its store network expansion, both new restaurants and acquisitions of existing sites. Competitive pricing is key to maintaining share in the QSR market, and the company has generally increased at or below consumer price index growth.
Sector
Consumer Cyclical
Industry
Restaurants
Stock Style Box
Small Core
Total Number of Employees
3,471
Website
https://www.collinsfoods.com

Competitors

Valuation

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Metric
CKF
YUMC
DMP
Price/Earnings (Normalized)
 24.0719.5238.18
Price/Book Value
 2.862.496.86
Price/Sales
 0.831.501.56
Price/Cash Flow
 7.508.9813.03
Price/Earnings
CKF
YUMC
DMP

Financial Strength

Metric
CKF
YUMC
DMP
Quick Ratio
 0.561.190.70
Current Ratio
 0.681.420.90
Interest Coverage
 2.07—3.03
Quick Ratio
CKF
YUMC
DMP

Profitability

Metric
CKF
YUMC
DMP
Return on Assets (Normalized)
 5.34%7.07%3.16%
Return on Equity (Normalized)
 18.16%12.88%16.12%
Return on Invested Capital (Normalized)
 8.00%7.47%4.84%
Return on Assets
CKF
YUMC
DMP
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Economic Moat
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CMPGY
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DRI
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DPZ
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YUMC
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WING
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