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<Research>YUM CHINA Reportedly Vying for Jardine's HK KFC, Pizza Hut Biz; UBS Sees Margin Upside and Faster APAC Expansion
Recommend 7 Positive 3 Negative 4 |
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YUM CHINA (09987.HK) and Carlyle Group are wrestling for a stake in Jardine Matheson's restaurant business unit, UBS said in its report. The business operates about 1,000 KFC and Pizza Hut stores across Hong Kong, Macau, Myanmar, Taiwan and Vietnam, with approximately 25,000 employees, and owns Hong Kong's pizza delivery brand PHD. According to media reports, the Jardine's restaurant unit generates around USD35-40 million in EBITDA annually, equivalent to about 2.3% of YUM CHINA's full-year 2025 EBITDA. The transaction valuation could reach approximately USD400 million, implying 10-11.4x EV/EBITDA. UBS estimated that by the end of 2026, YUM CHINA's cash balance, including cash and cash equivalents and short-term investments, could whop about USD950 million after factoring in shareholder returns. The broker believed the company's strong cash position provides ample financial flexibility and could support a cash-funded acquisition if the deal proceeds. In addition, UBS calculated that the Jardine restaurant unit's EBITDA margin for 2025 is around 4-5%, compared with YUM CHINA's EBITDA margin of 14-15%. Therefore, if the acquisition is completed, the broker expected improvements in the acquired business' margin and earnings contribution. It also believed the deal would strategically accelerate YUM CHINA's regional expansion in APAC. UBS maintained a Buy rating on Yum China Holdings, Inc. (YUMC.US) with a TP of USD67.6. Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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