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).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Restaurant Brands NZ<br>4Q20 Sales Checkout</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Restaurant Brands (RBD) delivered another period of robust sales growth in 4Q20, in line with our expectations, with the takeaway channel a net beneficiary of COVID-19 restrictions, which has more than offset dine-in limitations. Whilst safety precautions and drive through congestion have increased cost-to-serve, strong sales and operating leverage are likely to partially offset any margin impact. RBD operates in a historically defensive consumer segment, with a track record of performance, and a pipeline of growth opportunities. However, at 30x forward PE, we view the current risk/reward as fair: NEUTRAL.</p>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Earnings</strong>:&nbsp;We make limited changes to near-term earnings. We expect that COVID-19 restrictions may delay growth aspirations through extended consent and build times, and therefore lower our medium-term earnings expectations.</li>
<li><strong>Target price</strong>:&nbsp;We lower our target price -NZ$0.75to NZ$12.75, on the back of slower growth expectations.</li>
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<h3>Trading well through disruption, in line with expectations</h3>
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<p>RBD reported FY20 store sales of&nbsp;NZ$892m, largely in line with our expectations, and up +2.1% on the prior year period (+8.4% when accounting for the acquisition of its California business). Trading remains restricted across its US businesses&nbsp;where COVID-19 case resurgences have forced the closure of its dine-in business,&nbsp;however, the uplift in its takeaway and drive through operations have more than offset lost sales. RBD&nbsp;reports FY20 earnings on 25 February​​​​​​​ 2021.</p>
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<h3>Positive 4Q20 same store sales across all markets</h3>
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<li><strong>New&nbsp;Zealand&nbsp;(SSS +9.4% on the prior comparable period)</strong> —&nbsp;Sales growth accelerated into 4Q20, with total sales up +7.3%. RBD continues with its programme of selling Pizza Hut stores to independent franchisees, with four more divested in the quarter, offsetting two Taco Bell store openings.</li>
<li><strong>​​​​​​​Australia (SSS +3.6%)</strong> —&nbsp;Total&nbsp;quarterly sales increased +10.8% on the prior year, primarily driven by eight new store openings (four KFC, four Taco Bell).&nbsp;</li>
<li><strong>Hawaii (SSS +6.1%)</strong> —&nbsp;In-store dining remains restricted and is weighing on Taco Bell performance, with sales growth flat to negative. However, Pizza Hut has experienced an exceptional uplift in sales as consumers favour delivery options, more than offsetting weakness elsewhere.&nbsp;
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<li>​​​​​​​Store refurbishment profile of Taco Bell is a key growth driver. COVID-19 restrictions are likely to create consent and construction delays.</li>
</ul>
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<li><strong>California</strong> —&nbsp;First full quarter of trading bodes well with performance “up on the prior year and pre-purchase expectations”.</li>
</ul>
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<div><strong>Guy Hooper</strong></div>
<div><a href="mailto:guy.hooper@forsythbarr.co.nz" target="_blank" rel="noopener">guy.hooper@forsythbarr.co.nz</a></div>
<div>+64 4 495 5255</div>
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Restaurant Brands NZ 4Q20 Sales Checkout

NEUTRAL
Restaurant Brands (RBD) delivered another period of robust sales growth in 4Q20, in line with our expectations, with the takeaway channel a net beneficiary of COVID-19 restrictions, which has more than offset dine-in limitations. Whilst safety precautions and drive through congestion have increased cost-to-serve, strong sales and operating leverage are likely to partially offset any margin impact. RBD operates in a historically defensive consumer segment, with a track record of performance, and a pipeline of growth opportunities. However, at 30x forward PE, we view the current risk/reward as fair: NEUTRAL.


What's changed?&nbsp;



Earnings:&nbsp;We make limited changes to near-term earnings. We expect that COVID-19 restrictions may delay growth aspirations through extended consent and build times, and therefore lower our medium-term earnings expectations.
Target price:&nbsp;We lower our target price -NZ$0.75to NZ$12.75, on the back of slower growth expectations.



Trading well through disruption, in line with expectations


RBD reported FY20 store sales of&nbsp;NZ$892m, largely in line with our expectations, and up +2.1% on the prior year period (+8.4% when accounting for the acquisition of its California business). Trading remains restricted across its US businesses&nbsp;where COVID-19 case resurgences have forced the closure of its dine-in business,&nbsp;however, the uplift in its takeaway and drive through operations have more than offset lost sales. RBD&nbsp;reports FY20 earnings on 25 February​​​​​​​ 2021.


Positive 4Q20 same store sales across all markets



New&nbsp;Zealand&nbsp;(SSS +9.4% on the prior comparable period) —&nbsp;Sales growth accelerated into 4Q20, with total sales up +7.3%. RBD continues with its programme of selling Pizza Hut stores to independent franchisees, with four more divested in the quarter, offsetting two Taco Bell store openings.
​​​​​​​Australia (SSS +3.6%) —&nbsp;Total&nbsp;quarterly sales increased +10.8% on the prior year, primarily driven by eight new store openings (four KFC, four Taco Bell).&nbsp;
Hawaii (SSS +6.1%) —&nbsp;In-store dining remains restricted and is weighing on Taco Bell performance, with sales growth flat to negative. However, Pizza Hut has experienced an exceptional uplift in sales as consumers favour delivery options, more than offsetting weakness elsewhere.&nbsp;

​​​​​​​Store refurbishment profile of Taco Bell is a key growth driver. COVID-19 restrictions are likely to create consent and construction delays.


California —&nbsp;First full quarter of trading bodes well with performance “up on the prior year and pre-purchase expectations”.





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




Restaurant Brands NZ: 4Q20 Sales Checkout