Tuesday, February 15, 2011

Share Price Alert: Restaurant Brands Ltd

Image result for KFC NZ

The all-time peak for Restaurant Brands Ltd [RBD.NZX] shares was $2.76 back on October 29 but since then the share price has retreated by 29c or just over 10% to close at $2.46 yesterday.

There doesn't appear to be anything material within the company to suggest a slow down in company fortunes and there was even an NZX share price enquiry back in late Jan when the share price dropped 28 cents in a few weeks that came to nothing so the share price fall seems to be a mystery.

I can only guess that there could be cost pressures on the business from increased raw food prices and energy costs. Every staple has risen substantially over the last few months, especially this year and chicken, the primary cost for this business, has risen 10% in January alone.

While the company will have stable contracts for supply of raw food and power these costs will rise when the contracts expire. Add to this the minimum wage rise of 2% passed a few weeks ago and one can perhaps see some validity in the lower share price.

I have been uneasy about the RBD share price for some time and in November questioned the highs the share price was reaching.

There will obviously be more cost pressure as 2011 wears on so the share price is likely to retreat from its present levels unless price rises at the counter can be increased without affecting sales too much.

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Restaurant Brands @ Share Investor

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Discuss RBD @ Share Investor Forum

c Share Investor 2011

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