New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Restaurant Brands NZ</h2>
1Q20 Sales Takeaways
NEUTRAL
Restaurant Brands (RBD) delivered positive, albeit slower, quarterly sales growth across all markets as&nbsp;COVID-19 related disruption weighed in March. Whilst peak disruption will be apparent in 2Q20,&nbsp;RBD&nbsp;should experience a strong recovery in sales as New&nbsp;Zealand&nbsp;exits Alert Level 4, in our view providing some offset. Post&nbsp;COVID-19,&nbsp;RBD&nbsp;offers investors exposure to a&nbsp;defensive&nbsp;retail category against an uncertain backdrop. Through the global financial crisis (GFC)&nbsp;RBD's&nbsp;core brand,&nbsp;KFC, achieved robust same store sales growth, while quick service food outperformed other retail categories. ​​​​Following the recent pull back&nbsp;RBD&nbsp;is now trading in line with international peers. NEUTRAL.
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Takeout back on the menu in New Zealand
RBD&nbsp;will be one of the key beneficiaries of New&nbsp;Zealand's&nbsp;move&nbsp;to Alert Level 3 on Tuesday 28 April, in our view, with drive through and delivery services re-opening. We suspect pent-up takeout demand may drive a short-term surge in sales. Whilst the dine in channel remains closed across all markets,&nbsp;RBD's&nbsp;brand portfolio is well positioned with&nbsp;KFC&nbsp;and Taco Bell stores generally well suited for&nbsp;drive through traffic, often situated on driving thoroughfares.
In our report,&nbsp;Fried Chicken on Post Lock-Down Menu; Upgrade to NEUTRAL,&nbsp;published 17 April, we explored the earnings implications of&nbsp;COVID-19 for&nbsp;RBD. There is no change to our thought process following&nbsp;RBD's&nbsp;update.
Positive 1Q20 same store sales across all markets
RBD&nbsp;delivered positive 1Q20 same store sales (SSS) growth across all regions, slowing towards the end of the period with&nbsp;COVID-19 leading to various levels of sales disruption by market in late March.
<ul type="disc">
<li>New Zealand&nbsp;(SSS&nbsp;+1.7% on the prior comparable period) —&nbsp;KFC&nbsp;and Carl's Jr both maintained positive sales momentum albeit at a slower pace than recent quarters. Pizza Hut signalled a drop in sales as additional stores are sold to independent franchisees. Total sales declined -1.5% on the prior period, reflecting the impact of temporary store&nbsp;closures in the last week of the quarter under Alert Level 4 (SSS&nbsp;exclude the impact of temporary store closures).</li>
<li>​​​​​​​Australia (+2.0%) —&nbsp;KFC&nbsp;delivered robust&nbsp;SSS&nbsp;growth, despite the impact of&nbsp;COVID-19, which has seen the closure of the dine in channel. Total store sales increased +13% on the prior period, reflecting two additional&nbsp;KFC&nbsp;and Taco Bell stores and a lower level of temporary store closures due to refurbishments.</li>
<li>Hawaii (+7.9%) —&nbsp;1Q20 highlight, delivering strong&nbsp;SSS&nbsp;growth across both Taco Bell and Pizza Hut. Encouragingly, the Taco Bell refurbishment programme, a key growth avenue, continues to deliver with transformed stores delivering&nbsp;on average +22% sales growth in 1Q20. Total sales increased +6.3% on the prior period.</li>
</ul>
Guy Hooper guy.hooper@forsythbarr.co.nz +64 4 495 5255

Restaurant Brands NZ
1Q20 Sales Takeaways
NEUTRAL
Restaurant Brands (RBD) delivered positive, albeit slower, quarterly sales growth across all markets as&nbsp;COVID-19 related disruption weighed in March. Whilst peak disruption will be apparent in 2Q20,&nbsp;RBD&nbsp;should experience a strong recovery in sales as New&nbsp;Zealand&nbsp;exits Alert Level 4, in our view providing some offset. Post&nbsp;COVID-19,&nbsp;RBD&nbsp;offers investors exposure to a&nbsp;defensive&nbsp;retail category against an uncertain backdrop. Through the global financial crisis (GFC)&nbsp;RBD's&nbsp;core brand,&nbsp;KFC, achieved robust same store sales growth, while quick service food outperformed other retail categories. ​​​​Following the recent pull back&nbsp;RBD&nbsp;is now trading in line with international peers. NEUTRAL.

Takeout back on the menu in New Zealand
RBD&nbsp;will be one of the key beneficiaries of New&nbsp;Zealand's&nbsp;move&nbsp;to Alert Level 3 on Tuesday 28 April, in our view, with drive through and delivery services re-opening. We suspect pent-up takeout demand may drive a short-term surge in sales. Whilst the dine in channel remains closed across all markets,&nbsp;RBD's&nbsp;brand portfolio is well positioned with&nbsp;KFC&nbsp;and Taco Bell stores generally well suited for&nbsp;drive through traffic, often situated on driving thoroughfares.
In our report,&nbsp;Fried Chicken on Post Lock-Down Menu; Upgrade to NEUTRAL,&nbsp;published 17 April, we explored the earnings implications of&nbsp;COVID-19 for&nbsp;RBD. There is no change to our thought process following&nbsp;RBD's&nbsp;update.
Positive 1Q20 same store sales across all markets
RBD&nbsp;delivered positive 1Q20 same store sales (SSS) growth across all regions, slowing towards the end of the period with&nbsp;COVID-19 leading to various levels of sales disruption by market in late March.

New Zealand&nbsp;(SSS&nbsp;+1.7% on the prior comparable period) —&nbsp;KFC&nbsp;and Carl's Jr both maintained positive sales momentum albeit at a slower pace than recent quarters. Pizza Hut signalled a drop in sales as additional stores are sold to independent franchisees. Total sales declined -1.5% on the prior period, reflecting the impact of temporary store&nbsp;closures in the last week of the quarter under Alert Level 4 (SSS&nbsp;exclude the impact of temporary store closures).
​​​​​​​Australia (+2.0%) —&nbsp;KFC&nbsp;delivered robust&nbsp;SSS&nbsp;growth, despite the impact of&nbsp;COVID-19, which has seen the closure of the dine in channel. Total store sales increased +13% on the prior period, reflecting two additional&nbsp;KFC&nbsp;and Taco Bell stores and a lower level of temporary store closures due to refurbishments.
Hawaii (+7.9%) —&nbsp;1Q20 highlight, delivering strong&nbsp;SSS&nbsp;growth across both Taco Bell and Pizza Hut. Encouragingly, the Taco Bell refurbishment programme, a key growth avenue, continues to deliver with transformed stores delivering&nbsp;on average +22% sales growth in 1Q20. Total sales increased +6.3% on the prior period.

Guy Hooper guy.hooper@forsythbarr.co.nz +64 4 495 5255

Restaurant Brands NZ: 1Q20 Sales Takeaways