Having only been listed on the ASX since August 2011, Collins Foods (ASX: CKF) is perhaps not that widely followed by investors, however as the largest KFC franchisee in Australia, its restaurants are frequented by many hungry Australians hankering for some fried chicken. Shareholders who invested via the initial public offering (IPO) have unfortunately not had a 'finger lickin' good' experience, with the stock losing around 40% of its value almost immediately upon listing. In fact the stock has never since traded above its issue price.
With a financial year that ended on 28 April, the company has just released its full year results. While the statutory numbers look good, adjusting for one-off items associated with the IPO shows that "pro-forma" net profit after tax fell from $18.4 million to $16.4 million. The market seemed happy enough with the result, with the share price ending down just 1 cent.
While there wasn't a lot for investors to get excited about in the results, the increase in dividend for the full year from 6.5 cents in 2012 to 9.5 cents in 2013 will perhaps provide some solace for investors; however given the timing of the IPO, 2012 did not include an interim dividend, just a final dividend of 6.5 cents. So, while the full year looks impressive at first glance, the final dividend for 2013 has actually declined to 5.5 cents per share. This means the company is currently trading with a dividend yield at 5.8%.
Collins Foods is one of only a handful of companies which can provide investors which exposure to the restaurant industry. Given the deeper financial history available and, as the chart below shows, significant outperformance of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) by Domino's Pizza Enterprises (ASX: DMP) and Retail Food Group (ASX: RFG), investors may prefer to focus their attentions on these two firms instead.
Source: Google Finance
Foolish takeaway
Investors who chose to pick their own stocks need to think for themselves and do their own analysis. This means going beyond simply believing what a company's management team tells them. While management at Collins Foods describes the balance sheet as "strong", investors would be advised to do their own analysis and draw their own conclusions.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
