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<br>3Q21 Sales Takeaway</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Restaurant Brands (RBD) steadily navigated another period of trading restrictions across its operating markets, adding to its track record of solid performance. The company's Californian operations have alleviated the softer results achieved in New Zealand and Australia, with its brand portfolio continuing to benefit from defensive positioning to consumer spending. Sales growth was achieved in spite of store closures, up +2% on the previous comparable period. While we leave our full year earnings forecasts unchanged at this stage, we believe earnings risk is weighted to the downside from the ongoing impact of COVID-19 restrictions in New Zealand and Australia. NEUTRAL.&nbsp;</p>
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<h3>Solid results through restrictions, in line with expectations&nbsp;</h3>
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<p>RBD reported 3Q21 sales up +2% on the prior comparable period. Trading restrictions in New Zealand heavily impacted the quarter, riddled with store closures and limited operations in August and September. However, sales lost in New Zealand were fully offset by the additional two months of trading from the 69 stores acquired in California during 3Q20, and same store sales (SSS) continues to increase across the New Zealand, Hawaii and California operations. RBD has grown&nbsp;its total store count to 352&nbsp;through the opening of a store in each of New Zealand and Australia, with plans to open an additional two stores in California by year-end. We leave our FY21 revenue expectations unchanged which implies 4Q21 sales growth of +12% against the prior year.</p>
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<h3>3Q21 serves SSS growth</h3>
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<li><strong>New Zealand (SSS +10% on the prior comparable period)</strong> —&nbsp;KFC, Pizza Hut and Carl's Jr. continue to be strong performers. However, revenue was down -18% on the prior period due to the five weeks of store closure&nbsp;in Auckland. Upon a slight ease in trading restrictions during&nbsp;September, KFC received an additional boost in demand with its golden bucket campaign celebrating its 50-year anniversary in New Zealand. In addition, all brands remain available for delivery in the&nbsp;Uber&nbsp;Eats app&nbsp;which helps service peak period demand.&nbsp;RBD has grown its store network to 133, with&nbsp;one new Taco Bell store in Christchurch during the quarter.&nbsp;</li>
<li><strong>Hawaii (SSS +8%)&nbsp;</strong>—&nbsp;Limited lifting of COVID-19 restrictions has partially helped&nbsp;Taco Bell. SSS growth was driven by&nbsp;increased demand for Pizza Hut's home delivery service. Total reported sales increased +6% on the prior period.&nbsp;</li>
<li><strong>California (SSS +2%)&nbsp;</strong>—&nbsp;The newest addition to&nbsp;RBD remains a solid performer, generating revenues of NZ$40m in 3Q21 and year-to-date sales of NZ$117m.</li>
<li><strong>Australia (SSS -6%)&nbsp;</strong>—&nbsp;Australian operations were flat against the prior period, with new store sales offsetting the impact of trading restrictions. However, limited trading for stores located in&nbsp;Sydney malls and NSW in-line city stores attributed to the SSS decline. During the quarter&nbsp;RBD&nbsp;added a new Taco Bell store in Tamworth, bringing the Australian store count to 77.&nbsp;Continued easing of restrictions in NSW from 1 November 2021 provide a significant boost to near term performance.</li>
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Restaurant Brands NZ 3Q21 Sales Takeaway

NEUTRAL
Restaurant Brands (RBD) steadily navigated another period of trading restrictions across its operating markets, adding to its track record of solid performance. The company's Californian operations have alleviated the softer results achieved in New Zealand and Australia, with its brand portfolio continuing to benefit from defensive positioning to consumer spending. Sales growth was achieved in spite of store closures, up +2% on the previous comparable period. While we leave our full year earnings forecasts unchanged at this stage, we believe earnings risk is weighted to the downside from the ongoing impact of COVID-19 restrictions in New Zealand and Australia. NEUTRAL.&nbsp;


Solid results through restrictions, in line with expectations&nbsp;


RBD reported 3Q21 sales up +2% on the prior comparable period. Trading restrictions in New Zealand heavily impacted the quarter, riddled with store closures and limited operations in August and September. However, sales lost in New Zealand were fully offset by the additional two months of trading from the 69 stores acquired in California during 3Q20, and same store sales (SSS) continues to increase across the New Zealand, Hawaii and California operations. RBD has grown&nbsp;its total store count to 352&nbsp;through the opening of a store in each of New Zealand and Australia, with plans to open an additional two stores in California by year-end. We leave our FY21 revenue expectations unchanged which implies 4Q21 sales growth of +12% against the prior year.


3Q21 serves SSS growth



New Zealand (SSS +10% on the prior comparable period) —&nbsp;KFC, Pizza Hut and Carl's Jr. continue to be strong performers. However, revenue was down -18% on the prior period due to the five weeks of store closure&nbsp;in Auckland. Upon a slight ease in trading restrictions during&nbsp;September, KFC received an additional boost in demand with its golden bucket campaign celebrating its 50-year anniversary in New Zealand. In addition, all brands remain available for delivery in the&nbsp;Uber&nbsp;Eats app&nbsp;which helps service peak period demand.&nbsp;RBD has grown its store network to 133, with&nbsp;one new Taco Bell store in Christchurch during the quarter.&nbsp;
Hawaii (SSS +8%)&nbsp;—&nbsp;Limited lifting of COVID-19 restrictions has partially helped&nbsp;Taco Bell. SSS growth was driven by&nbsp;increased demand for Pizza Hut's home delivery service. Total reported sales increased +6% on the prior period.&nbsp;
California (SSS +2%)&nbsp;—&nbsp;The newest addition to&nbsp;RBD remains a solid performer, generating revenues of NZ$40m in 3Q21 and year-to-date sales of NZ$117m.
Australia (SSS -6%)&nbsp;—&nbsp;Australian operations were flat against the prior period, with new store sales offsetting the impact of trading restrictions. However, limited trading for stores located in&nbsp;Sydney malls and NSW in-line city stores attributed to the SSS decline. During the quarter&nbsp;RBD&nbsp;added a new Taco Bell store in Tamworth, bringing the Australian store count to 77.&nbsp;Continued easing of restrictions in NSW from 1 November 2021 provide a significant boost to near term performance.



Restaurant Brands NZ: 3Q21 Sales Takeaway