Wednesday, August 3, 2011

Collins Foods IPO

Lets jump across the ditch for a while to look at the impending IPO of Collins Foods, the franchisee of YUM! Brands Inc [YUM]that operates the 119 store KFC chain in Queensland and the 85 unit Sizzler business.

The best way to compare the merits or otherwise of this IPO is to make a comparison with the NZ franchisee of KFC, Pizza Hut and Starbucks in New Zealand, Restaurant Brands Ltd [RBD.NZX].

The latest figures that we have for Collins Foods is in their prospectus and for Restaurant Brands their 2011 Annual Report, although we will look at the 1998 Annual Report for RBD to get a comparison between the two companies at the time of their respective IPOs.

Not all figures and ratios are available for Collins Foods.

The Stats

Restaurant Brands - Compiled from 1998 & 2011 Annual Reports

1997 2011
Net Profit 11.1 25.1
216.8 324.4
13.1 24.6
Net Debt
58 29.5
Net Cashflow 18.3 40.5
Store Numbers 124 208
NTA per share
PE Ratio

Market Cap
Div Yield

Net Margin

* Figures in NZ dollars

Collins Foods - Compiled from 2011 Prospectus

1997 2011
Net Profit


Net Debt - Proforma 123.7
Net Debt - Audited
Net Cashflow
Store Numbers
NTA per share

PE Ratio

Market Cap
Div Yield

Net Margin

*Figures in Australian dollars

The most interesting part of this IPO is that of the $232.5 million raised $105 million will be used to pay down the $228 million debt mountain that has accrued under the ownership of Pacific Equity Partners, so shareholders are basically paying back the banks by buying shares.

The RBD IPO had shares valued at $NZ 2.20 each with roughly a $200 million market cap, while the Collins Foods IPO has a $2.50 IPO share price with a market cap of around $AU230 million.

While the RBD IPO and subsequent performance of the company foundered for many years and failed to meet IPO expectations the company is now in relative health and has grown over the last 3-4 years.

Collins Foods is laden with debt and has had a very patchy last few years in terms of sales and profit.

When comparing the two companies one can clearly see the value in RBD over Collins Foods. Better profit on less sales, indicating far better margins and less debt on the books.

Investors would be far better off buying RBD shares than Collins Foods and it will be interesting to watch what happens across the tasman with Collins now that it is listed and RBD managment have indicated that they are still interested in expanding there given the right opportunities.


Collins Foods


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Discuss RBD @ Share Investor Forum

c Share Investor 2011