Yum! Brands "Highlights From Meetings with Yum! Brands" (Buy) Geiger

Research evidence excerpt

Yum! Brands "Highlights From Meetings with Yum! Brands" (Buy) Geiger

with expectations of expanding the program to stores representing 70% of system sales

by the end of '26 (less than half of markets have loyalty). Turnaround for the KFC US

business is still underway, with management remaining confident in the chicken

category while focused on shifting consumer perception towards a more innovative

brand w/ better boneless chicken offerings. KFC's store development pipeline remains

robust, reflecting strong unit economics, with significant opportunity for further

expansion (2/3 of units not built yet globally) given several markets with sizeable

populations (ie Brazil) are underpenetrated.

Pizza Hut sale allows YUM to increase focus on key brands, accelerate growth

Meetings highlighted additional insights into the announced sale of Pizza Hut ex China

to LongRange Capital and Pizza Hut China to YUMC for a combined $2.7BN (~

$2.3BN net proceeds). We view the combined transaction valuation as better than

feared, including ~17x for the China business and ~5.5x for the non-China business

based on trailing 12 month EBITDA. Rather than making likely significant capital

investments required to turnaround Pizza Hut in the highly competitive pizza category,

the planned sale will enable YUM to focus resources on TB & KFC to drive growth,

including TB international expansion and the rollout of loyalty at KFC. We expect a

significant portion of the proceeds from the transaction will likely be used for share

repurchases, with YUM announcing an incremental $4BN buyback plan, as the

company restores its capital returns focus. YUM will continue to provide Byte to Pizza

Hut ex China with fees received for services to likely offset corporate G&A expenses

typically allocated towards PH.