First-half results beat UBS estimates and KFC Australia impressed with operating earnings growth of 24%, supported by 14% growth in stores. An unusually hot summer in Europe affected sales, down -2.5%.
In the medium term, the broker expects both the Australian Taco Bell business and KFC Europe will enjoy operating leverage from an increasing number of stores, based on relatively fixed corporate costs and improved operations in Germany.
No earnings guidance was provided. The broker maintains a Buy rating and raises the target to $7.80 from $6.30.
Sector: Consumer Services.
Target price is $7.80.Current Price is $7.19. Difference: $0.61 – (brackets indicate current price is over target). If CKF meets the UBS target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).