Durban - Famous Brands shares surged up to 8 percent higher yesterday as the market signalled its expectations about the first set of results that will include Wimpy and Whistle Stop following the acquisition of Pleasure Foods in December.
The stock has risen 50 percent to R6.80 over the past eight weeks. The company reports its results tomorrow.
The group, which also owns Steers, Debonairs Pizza and FishAways, said recently that it expected earnings to be between 50 and 70 percent higher than the 14.5c a share achieved in the six months to August last year.
The acquisition is expected to translate into substantial cost savings through the amalgamation of the distribution centre's of Famous Brands and Pleasure Foods.
Warwick Lucas, an Imara SP Reid analyst, said yesterday that earnings for the second half were expected to be 23.7 percent higher, translating into a full-year earnings increase of 38.2 percent.
For the year to February 2004, which did not include the acquisition, the group reported a 24 percent increase in revenue to R363 million and a 47 percent rise in attributable profit to R24 million.
Market consensus is for earnings of 54.5c a share for the year. Famous Brands is expected to show compound growth of 35 percent in the next three years.
Lucas said the new brands were gearing up growth and giving Famous Brands volume advantages.
"The higher price is largely due to improved consumer confidence, as fast food is definitely a discretionary spend item," he said.
Mpho Mojalefa, a dealer at Barnard Jacobs Mellet, said the rise was linked to positive market sentiment over the stock.
"The share is very sensitive to even light trades as it is very illiquid," he said. "This type of share is watched very carefully by individuals rather than by institutions."
Old Mutual owns 18.1 percent of the stock, while the Halamandaris family, which started Steers Holdings, holds 28 percent.
"The new brands have turned Famous Brands into a growth stock and investor interest seemed to be growing."
The share price closed 40c up at R6.70 yesterday, while the leisure and hotels sector dipped 0.21 percent.