Durban - Investors in Famous Brands, the new owner of Wimpy and Whistle Stop fast food outlets, are optimistic about the contribution these stores will make to the group's earnings and have taken the company's stock 28 percent higher in the past six weeks.
Yesterday the share price of Famous Brands was 10c lower at R5.80, off its high of R6 reached on Friday and 160 percent higher since October last year. The food sector rose 1.09 percent.
Famous Brands, which also owns Steers, Debonairs and Fishaways, took over Wimpy and Whistle Stop through the acquisition of Pleasure Foods in December 2003.
An analyst, who declined to be named, said yesterday that "the effects of the Pleasure Foods acquisition, a deal which was well structured, will begin to come through in the interim results for the first time".
These results are due on October 27.
Cavan Osborne, an analyst at Andisa Securities, said yesterday that Famous Brands' performance was driven by "the market, which overall has done relatively well, and consumer spending, which is incredibly buoyant".
The Pleasure Foods acquisition is expected to translate into substantial cost savings through the amalgamation of Famous Brands' existing distribution centre and Pleasure Foods' distribution centre, he said.
In August Famous Brands told shareholders that headline earnings for the six months to August would be between 50 percent and 70 percent higher.
The company said buoyant trading conditions, the inclusion of earnings from Wimpy and Whistle Stop and synergies arising from the Pleasure Foods acquisition, were factors behind the increase in earnings.
For the year to February the group reported a 24 percent increase in revenue to R363 million and a 47 percent rise in attributable profit to R24 million. These results did not reflect the Pleasure Foods acquisition.
Osborne said the only risk facing the company at present was increased competition from a refocused McDonalds, which recently closed down several underperforming stores.
However, McDonalds promoted burger consumption in a market that was biased towards chicken products and therefore it might, in fact, benefit Famous Brands, Osborne said.