KFC’s 9MFY12 results were below consensus but well within our expectations. Revenue grew by 9.3% y-o-y, supported by decent topline growth for its KFC restaurant business, integrated poultry and education divisions. However, losses from its integrated poultry segment, education and KFC India operations weakened the group’s earnings. As it will soon be privatised by Massive Equity SB, we are discontinuing our coverage on KFC.
In line. The group’s revenue improved by 9.3% y-o-y, backed by healthy topline turnover numbers in most of its divisions namely KFC restaurants (+8.9%), integrated poultry segment (+12.4%), and education (+134.5%). Its ancillary segment’s revenue moderated by 3.7% y-o-y. However, net profit shrank by 9.6% y-o-y due to losses in its integrated poultry segment, education and KFC India operations.
Weaker margins. The EBIT margin nudged down by 1% to 6.7% y-o-y due to: i) rising cost pressure from food, utility, labour and logistics, and ii) higher raw material prices. We expect margins to remain flat or lower in view of high commodity prices and rising overhead costs.
Ceasing coverage. The shareholders gave the go-ahead to KFC’s proposed privatisation in the EGM held on 5 Nov 2012. The acquisition is expected to be completed by year-end and the board of directors has no intention to maintain the group’s listed status. Upon completion, KFC will undertake to return the cash proceeds from the disposal to shareholders at RM4/share and warrant holders at RM1/share, via a capital repayment exercise and a warrant scheme respectively.
In line. The group’s revenue improved by 9.3% y-o-y, backed by healthy topline turnover numbers in most of its divisions namely KFC restaurants (+8.9%), integrated poultry segment (+12.4%), and education (+134.5%). Its ancillary segment’s revenue moderated by 3.7% y-o-y. However, net profit shrank by 9.6% y-o-y due to losses in its integrated poultry segment, education and KFC India operations.
Weaker margins. The EBIT margin nudged down by 1% to 6.7% y-o-y due to: i) rising cost pressure from food, utility, labour and logistics, and ii) higher raw material prices. We expect margins to remain flat or lower in view of high commodity prices and rising overhead costs.
Ceasing coverage. The shareholders gave the go-ahead to KFC’s proposed privatisation in the EGM held on 5 Nov 2012. The acquisition is expected to be completed by year-end and the board of directors has no intention to maintain the group’s listed status. Upon completion, KFC will undertake to return the cash proceeds from the disposal to shareholders at RM4/share and warrant holders at RM1/share, via a capital repayment exercise and a warrant scheme respectively.
Source: OSK
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