After corporate exercise (bonus issue and share split) on 8 Sept 2010, the price of KFC Holdings was adjusted from 22.12 to 2.81 and it looks more attractive and cheaper thereafter.
KFC Holdings is owned by Johor Corporation which controlling 50.04% of shareholding via QSR Ventures Sdn Bhd and QSR Berhad.
Buy opportunity for KFC Holdings. Why?
- Strong financial position
KFC Holdings is a company which has good financial position as follows;
a. Current ratio is 1.22 which mean strong cash position.
b. Gearing ratio is 0.6 which mean very low debt.
c. ROE measures the capability of making profit. Benchmark of ROE is 15% as recommended by Warrant Buffet where as the latest KFC Holdings ROE was 16.47 and for 4 years average ROE, it was 17.42. Both are higher than Warrant Buffet’s benchmark.
- Good dividend payment
Since year 2005, lowest dividend paid was 16 sen. The highest, in turn, was 26 sen which paid this year and before the corporate exercise. The par value was RM1.00 before corporate exercise. It is mean that, based on par value KFC Holdings has paid dividend ranging from 16% to 26% to shareholders since year 2005 and it was lucrative dividend.
- Growing net profit.
The net profit growth of KFC Holdings (in million) can be seen as follows;
Year Net Profit (RM million)
2005 -31.50
2006 99.05
2007 104.27
2008 118.54
2009 130.40
2010 140.00 (expectation)
The statistic above shows the growing pattern of KFC Holdings net profit.
- Expanding business – local and oversea.
In term of business networks, company currently has 495 outlets nationwide (32 of them are drive-thru outlets).
In year 2011, KFC Holdings will expand their business locally and abroad.
As for local expansion plan, the company will open another 20 outlets (12 of them are drive-thru outlets) nationwide.
As for overseas business operation, as well as Cambodia, KFC Holdings has started operation in Mumbai India. KFC Holdings has been appointed as master franchisee by master franchisor in USA namely Yum! Brand Inc. As a master franchisee, KFC Holdings has a right to open outlets throughout India.
At the moment, the company has 7 outlets and in year 2011 they will open another 17 outlets. We believe that the business expansion in India will be supported by the growing middle income group in tandem with encouraging economic growth which expected to grow at 9 to 10 per cent annually.
KFC is the world class brand.
We can follow Warrant Buffet way who always prefer to invest in well known brand company like Coca Cola.
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