Daily Share Chat: Restaurant Brands

By Jenny Ruth

Monday 28th September 2009

Restaurant Brands is achieving growth in same store sales for its key KFC stores and a continuation of its current transformation program should improve profitability, says McDouall Stuart.

"After sustained strong sales growth from KFC and the continued turnaround in Pizza Hut in the first six months of the financial year, the company has removed its cautious earnings guidance and now anticipates profits for the full year to be in the vicinity of $15 million, an increase of some 28%," it says.

The broker is forecasting a $14.7 million net profit for the year ending February 2010, rising to $16.7 million the following year.

Last week, Restaurant Brands reported a 4.8% rise in second quarter sales to $96.9 million with same store sales up 6.9%. On October 16, it is expecting to report a normalised first-half net profit of $4.1 million, an 87% increase on its first-half last year.

"Despite the recovery in the share price in recent months, the shares remain attractive and should continue to appreciate in value, McDouall Stuart says. The broker values the shares at $1.88 compared with Friday's close at $1.20.

"The company has a strong finance structure and generates sound cashflow which could lead to higher distributions to shareholders in the future."

BROKER CALL: McDouall Stuart rate Restaurant Brands as buy.

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