Collins Foods (CKF) – German expansion

Collins Foods operates KFC stores in Australia and Europe. The company was founded in 1969 and is based in Hamilton in Brisbane. Collins Foods (CKF) recently posted an update that showed trading performance running modestly above Ord Minnett estimates as the KFC fast food store chain reiterated guidance for growth in FY26 net profit in the “mid-to-high teens”, noting the company rules off its books on 27 April.

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The company highlighted its German operations, where we see Collins as having a strong growth opportunity as it leverages the broader brand investment from KFC global franchisor Yum! Brands. Underscoring this, Collins recently agreed to buy a portfolio of eight stores in the wealthy and populous German state of Bavaria for €3.1 million ($5 million) in FY26, which gives it a platform for further organic growth in what is an underpenetrated market for the KFC brand. The deal, which brings its German store footprint to 24 in three states – with a target of 45–90 new sites over four years – is expected to be completed by June and be EPS accretive immediately.

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In The Netherlands, Collins struck a revised franchise agreement with Yum! Brands, extending the deal to the end of 2029. Under the new agreement, the Yum! Brands will take over marketing responsibilities from January 2027, with the Australian company to act as the store operator and receive service fees for doing so. The deal sees growth targets in the Dutch market being tempered but Collins notes the “profit impact in The Netherlands is immaterial”.

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Meanwhile, Collins noted same-store sales (SSS) growth in its dominant Australian division was 2.7% in FY26-to-date but had accelerated in the second half of FY26 to 3.2%. Post the trading update, Ord Minnet trimmed its FY26 EPS estimate by 0.7%, while our forecasts for FY27 and FY28 increased by 7.2% and 8.4%, respectively, which led us to raise our target price to $12.00 from $10.50. There is value apparent in Collins, but the company needs to exhibit a sustained period of performance in the German market, which the company is touting as its next ‘growth pillar’, before we can become more constructive on the stock.