Thursday, October 13, 2011

KFCH edges up in early trade

KUALA LUMPUR: Shares of KFC HOLDINGS (M) BHD [] rose in early trade on Thursday, Oct 13 after RHB Research Institute said the company's earnings outlook was not dampened by gloomy economic conditions.

At 9.30am, KFCH was up nine sen to RM3.32 with 254,800 shares traded.

RHB Research in a note Oct 13 said that despite the slowdown in the global economy, KFCH expected its topline growth to remain resilient for FY12.

Although management does expect a slowdown in revenues, it has strategies in place to mitigate the potential slowdown through introduction of value propositions for customers such as its RM4.50 meal, said the research house.

RHB Research said that despite offering various value meals and other promotions, it expects KFCH's EBIT margins to remain stable in FY12-13 at about 8.2-8.5% p.a. (8.5-8.8% p.a. in FY10-11).

'We believe this is achievable given that prices of KFCH's key raw materials, corn and soy, are expected to decline along with other commodities in view of a global economic slowdown.

'We expect KFCH's topline and earnings outlook to remain stable despite the cloudy economic outlook, as it is operating in a resilient segment of the F&B sector. We reiterate our Outperform call on the stock, with an unchanged fair value of RM3.50 based on 14.5x FY12 EPS,' it said.

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