2011 Media Releases

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) has initiated coverage of restaurant operator Collins Food (ASX: CKF) with a Buy recommendation.

Research analyst Raymond Gonzalez said, “Operating in the quick service restaurant (QSR) market, Collins Food is underpinned by an internationally recognised brand (KFC) and boasts a favourable business model. Collins Food Group operates in an attractive industry as economic cycles have not impacted the QSR market in the same way apparel and household goods have suffered.

“What sets the company apart from most other listed retailers is that it does not require an investment in inventory, which reduces the risk substantially in our view”. 

Despite the economic uncertainty, Deutsche Bank analysts believe Collins Food Group offers compelling valuation, trading at a 15% discount to ex-100 listed retailers and a 53% discount to Dominos.

Gonzalez adds that “An extensive store refurbishment and rollout program is expected to drive earnings growth with a plan to refurbish 84 KFC restaurants and open up to seven new stores per year over the next five years. While capex investment is required to generate this growth, the expansion should provide some momentum in forecast earnings compared to the last two or three years.”

Looking forward, the analysts see the following as risk to their earnings estimates and valuation; store rollout and refurbishment delays, food sanitation issues, termination of franchise agreement with Yum!, price rises, regulatory impact  and increased competition.

Collins Food Group owns and operates 119 KFC restaurants, 26 Sizzler restaurants in Australia and franchises 59 Sizzler restaurants in Asia. The company has more than 40 years experience in operating chained QSR’s and a 25-year history operating casual restaurants in Australia. Collins Food Group operates its KFC restaurants under franchise agreements with Yum! Brands and it owns the Sizzler trademark globally (ex-US, Guatemala and Puerto Rico).

For further information, please contact:

Deutsche Bank AG    
Name : Amy King   
Phone: +61 (0) 2 8258 2505
E-mail: amy.king@db.com