MENU

Is Collins Foods Ltd the next Domino’s Pizza Enterprises Ltd?

After the market closed on Monday Australian KFC and Sizzler operator Collins Foods Ltd (ASX: CKF) announced that it has entered into a binding agreement to acquire 11 KFC restaurants located in Germany.

According to the release Collins Food will purchase the restaurants directly from their current franchisors KFC Great Britain and KFC Germany for €12.7 million ($18.3 million).

This will be the company’s first foray into the European market, following in the footsteps of Domino’s Pizza Enterprises Ltd. (ASX: DMP), which acquired the Germany-based pizza chain Joey’s Pizza at the end of last year.

Should the deal complete it will increase the total number of KFC stores under operation by Collins Food to 202.

Whilst 11 new restaurants doesn’t sound like much to get excited about, there is a lot of room to grow its restaurant count in Germany.

Collins Food has arrived in the German market at a time when KFC Germany plans to accelerate its growth strategy. Last month KFC Germany advised that it plans to more than double the KFC store network from 140 stores to 300 stores in the near future.

Collins Foods’ Managing Director and CEO Graham Maxwell had this to say on the deal:

“We are excited about the purchase of these 11 restaurants and the opportunity to be part of the dynamic growth plans for KFC in Germany. Having successfully run, acquired, integrated and grown KFC restaurants in Australia, this acquisition provides a unique new market entry opportunity for Collins Foods that will be immediately EPS accretive and add an additional growth channel to our business.”

So far the market reaction to the news has been positive and I can’t say I’m surprised. At just over 14x full year earnings Collins Foods’ shares appear to be great value and a much cheaper alternative to the likes of Domino’s and Retail Food Group Limited (ASX: RFG).

If you plan to invest in Collins Food or any other shares today I would highly recommend checking if you own these rotten shares. Now could be the perfect time to swap them out for something better if you ask me.

3 Rotten Shares to Sell, and 1 to Buy Today

After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.