I've just had a good read through the CKF H1 results and came away feeling decent about the business although a little disappointed in the dividend cut as I thought they would probably be able to hold that flat through these rockier times.
KFC Australia continues to be the powerhouse part of the company and I'm pretty confident we will see that part of the business rebound strongly in FY26. I'm not as confident about KFC Europe and Taco Bell as we seem to continue to struggle to build any momentum there. I'm interested to know what a best case scenario EBIT margin looks like for Europe when costs normalise to some degree because it's always lagged the Australian franchises by a long way.
I continue to feel like another acquisition in Europe is imminent and am actually surprised we haven't seen one announced in the last 6 months.
Management investing more heavily in the business through increased Capex is a good sign of their confidence that the issues are short term in my view.
If we apply a consistent decline of 18% to both the FY25 EPS and dividends where trading at a forward PE ratio of 20 times earnings and a dividend yield of 2.8% fully franked.
It was interesting to see quite a few brokers raise their price targets after these results with Citi Group, Wilsons and Goldman all sitting between $10.70 and $9.38 with their price targets.
CKF Price at posting:
$8.07 Sentiment: Hold Disclosure: Held
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