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

Restaurant Brands NZ 1Q21 Sales Takeaway

NEUTRAL
Restaurant Brands (RBD) continues to deliver as ordered with another period of strong quarterly sales growth, with positive same store sales (SSS, adjusted for temporary store closures) contribution across all markets. We make small positive revisions to near-term earnings reflecting sales momentum and store acquisitions. RBD has a robust pipeline of growth opportunities and a reasonable track record of execution. Trading on a 23.5x 12 month forward PE, we believe RBD is fairly priced at current levels and retain our NEUTRAL rating.


What's changed?&nbsp;



Earnings:&nbsp;We lift our sales assumptions slightly on the back of a strong 1Q21, which drives small lifts to our NPAT forecasts +1%–2% over the medium-term.
Target price:&nbsp;Our target price lifts +25cps to NZ$13.40.



Strong start to FY21&nbsp;


RBD&nbsp;reported 1Q21 comparable sales growth of +11.2% on the prior year period. Headline sales increased&nbsp;+29.8% to&nbsp;NZ$259.7m,&nbsp;with the inclusion of its California business and Australian store acquisitions. 1Q21 sales growth was ahead of our full year run rate, we&nbsp;expect momentum to moderate as consumer mobility returns and as it cycles large growth periods/inclusion of California.&nbsp;However, we currently see earnings risk to the upside should 1) buoyant conditions continue, and 2) store growth, either roll out or acquisition, occur faster than expected.


Divisional highlights



New Zealand (SSS +11.3% on the prior comparable period)&nbsp;— Total sales increased +17.6%&nbsp; against 1Q20, which was impacted by six lost store days as a result of lockdowns. Carl's Jr continues to be a highlight, supported by its delivery offering in addition to strong in store sales growth. KFC and Pizza also maintained positive momentum.
Australia (SSS +1.1%) —&nbsp;1Q21 sales increased +11.1% on the prior year period, supported by the acquisition of five KFC stores. Its comparatively softer SSS is&nbsp;a factor of store location, with inner city and mall based stores making up proportionally more sales than&nbsp; other locations.
Hawaii (SSS +9.6%) —&nbsp;Strength in Pizza Hut continues, with its delivery offering well suited to the fluid COVID-19 backdrop. As social distancing restrictions ease, Taco Bell has shown&nbsp;signs of recovery.&nbsp;RBD's&nbsp;refurbishment programme experienced consent delays through 2020 as a result of COVID-19 disruption, which we expect to mitigate as disruption eases. &nbsp;&nbsp;
California —&nbsp;1Q21 sales beat pre-acquisition expectations, trading comfortably ahead of the prior year. Sales levels&nbsp;remained broadly flat against&nbsp;4Q20.





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




Restaurant Brands NZ: 1Q21 Sales Takeaway