{"id":11639,"date":"2024-06-28T14:38:08","date_gmt":"2024-06-28T14:38:08","guid":{"rendered":"https:\/\/economicherald.net\/?p=11639"},"modified":"2024-06-28T14:38:08","modified_gmt":"2024-06-28T14:38:08","slug":"criterion-did-someone-say-gyg-what-about-ckf","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=11639","title":{"rendered":"CRITERION: Did someone say\u2026 GYG? What about CKF?"},"content":{"rendered":"

Did someone say Guzman y Gomez?<\/p>\n

A word or two might have been written about the Mexican food chain\u2019s extraordinarily hyped debut last week, but KFC franchisee Collins Foods (ASX:CKF)<\/strong> on Tuesday reminded investors that Guzman y Gomez (ASX:GYG)<\/strong> is not the only listed fast food joint in town.<\/p>\n

The operator of 279 of about 750 KFC outlets in Australia \u2013 as well as the hitherto underperforming Taco Bell chain \u2013 Collins Foods served up an appetising 15.6 per cent boost in underlying net profit to $60 million, on record turnover of $1.49 billion (up 10 per cent).<\/p>\n

However, consumer sentiment is weighing down like a dodgy Zinger hot and crispy double box and same-store growth has been negative for the first seven weeks of the current financial year.<\/p>\n

Investors were unsure what to make of the result, with the stock bounding 7 per cent in immediate response but sagging 9 per cent the next day.<\/p>\n

Investment bank Jarden describes a \u201cmixed outlook with near-term challenges but long-term opportunity\u201d \u2013 which sounds about right.<\/p>\n

Jarden provides fresh valuation metrics to compare the stock against Guzman y Gomez. Given Guzman y Gomez shares listed at a 36 per cent premium, investors might be feeling queasy(dilla) about having missed out on the $2.2 billion debut.<\/p>\n

We\u2019re no fan of the George Mallory \u2018because it\u2019s there\u2019 rationale \u2013 and not just because he died on his Everest ascent (or descent).<\/p>\n

So how do the relative numbers stack up?<\/p>\n

On revised broker estimates, Collins Foods trades on a multiple of around five times expected earnings before interest tax and depreciation (ebitda) for the 2024-25 year, compared with around 42 times for Guzman y Gomez.<\/p>\n

Domino\u2019s Pizza Enterprises (DMP)<\/strong> trades on 2024-25 multiple of around 10 times, but expectations may change in the lead up to the group\u2019s full-year results in August.<\/p>\n

Of course, earnings multiples aren\u2019t the be-all-and-end-all if an \u2018expensive\u2019 stock has superior growth prospects.<\/p>\n

There\u2019s little doubt that Guzman y Gomez is both well-run and fast growing, with its healthier offerings gaining traction with younger consumers. Since entering the local market the chain has gone off like a jalapeno stuffed burrito, having expanded from 53 stores a decade ago to 185 stores.<\/p>\n

\u201cThe crown jewel in Guzman\u2019s story \u2026 is its projected rapid growth,\u201d says IG Markets analyst Hebe Chen.<\/p>\n

\u201cGuzman y Gomez anticipates opening 30 new restaurants in 2024-25 and aims to increase annual openings to 40 per year within the next five years, reaching 1,000 Australian locations in 20 years. That\u2019s a feat only achieved by McDonald\u2019s and Subway in Australia.\u201d<\/p>\n

If Guzman y Gomez were<\/em> to achieve this, its shares would be a better bargain than a 50 cent burrito.<\/p>\n

Putting on the villain hat, pre-IPO Morningstar raised eyebrows (and sombreros) by valuing Guzman y Gomez shares at a mere $15.<\/p>\n

In a lengthy treatise the firm this week doubled down, claiming Guzman y Gomez would need to open 7,320 stores in the next decade to justify the growth assumptions.<\/p>\n

\u201cWe see more attractive valuations in \u2026 Domino\u2019s and Collins Foods, both trading at discounts of around 40 per cent to our fair value estimate.\u201d<\/p>\n

Domino\u2019s shares have lost one-third of their value after an uninspiring January 24 trading update and the jury\u2019s out on whether this decrement adequately compensates for the group\u2019s offshore problems, especially in Japan.<\/p>\n

Perhaps Guzman y Gomez is a case of buying on dips: not the guacamole ones but a potential share price after pre-IPO investors cash in their chips (not the corn ones).<\/p>\n

\u00a0<\/p>\n

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.<\/em><\/p>\n

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. <\/em><\/p>\n

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.<\/em><\/p>\n

The post CRITERION: Did someone say\u2026 GYG? What about CKF?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Did someone say Guzman y Gomez? A word or two might have been written about the Mexican food chain\u2019s extraordinarily hyped debut last week, but [more…]<\/a><\/p>\n","protected":false},"author":0,"featured_media":11640,"comment_status":"","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-11639","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nCRITERION: Did someone say\u2026 GYG? What about CKF? - Economic Herald<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/economicherald.net\/?p=11639\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CRITERION: Did someone say\u2026 GYG? 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