Daily Share Chat: Restaurant Brands

Restaurant Brands' latest profit upgrade suggests the recent sales momentum from the KFC business has caught even the company by surprise, says First NZ Capital analyst Sarndra Urlich.

"There is continued evidence that the traction from the already transformed stores is real and long-lasting," Urlich says.

"Add to that a further 30 transformed stores over the next few years and Restaurant Brands could very well enjoy further ‘super growth' from the KFC brand."

Urlich has upgraded her forecast earnings for the year ending February 28 from $16.2 million to $18.2 million and her 2011 forecast from $17.1 million to $19.1 million.

"The reasons for not buying Restaurant Brands in the past are long gone (including no revenue growth, aggressive gearing, ongoing profit warnings etc.)."

Urlich says she doesn't believe the reason for recent growth is purely a function of the ‘buying down' phenomenon during a recession. "Restaurant Brands is also reaping the benefits of effective management and has every chance of further surprising on the upside."

She has upgraded her valuation and 12-month target price for the shares from $1.57 to $1.84 and says she believes "it is not too late to jump on board, notwithstanding the stellar performance of the stock since the beginning of 2009."

BROKER CALL:  First NZ Capital rate Restaurant Brands as outperform.

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