Senior Business Reporter
SIMBISA Brands, the Quick Service Restaurant (QSR) is generating sufficiently strong free cash flows to drive its 180 potential projects identified over the next two financial years, a leading equities research firm, IH Securities has noted.
The Group has a significant pipeline of new stores and expects to open 83 stores in the 2023 financial year, mainly in Zimbabwe (41) and Kenya (41) at a cost of about US$27 million.
In its latest report, IH said Simbisa continues to pursue its growth strategy hinged on improved deliveries, technology development, continued growth in footprint and brand development.
“In Kenya, sitting at a store count of 224, Simbisa consolidated its position as the largest QSR operator in the market surpassing a key milestone of 200 stores.
“The Group has a significant pipeline of new stores and expects to open 83 stores in FY23, mainly in Zimbabwe (41) and Kenya (41) at a cost of about US$27mn.
“Simbisa is generating sufficiently strong free cashflows to drive this growth. As such, we expect an increase in customer counts, from a low base, on the back of improved trading hours and increased store count, translating to increased revenue of US$289.5mn for FY23,” said IH.
The equities research firm said it forecast stronger top line growth, driven largely by footprint expansion, customer count recovery post-pandemic and elevated average spend in line with predicted economic growth both in the region and in Zimbabwe.
“We forecast revenue will increase by 25 percent in FY23 to circa $290 million. EBITDA is expected to grow 20 percent to US$49 million over the same period.
“We believe the cost containment measures adopted during the Covid-19 pandemic can be sustained moving forward.
“The Group is generating sufficiently strong free cash flows to fund its future capital expenditure. We forecast FCF to trend between US$30mn and US$40mn over the next 5 years.”
IH noted that in Zimbabwe, Simbisa customer count has been increasing at an average rate of circa 8,2 percent over the past few years despite headwinds emanating from the Covid-19 pandemic and economic pressures in the country.
In FY22, customer count increased from 28 million in FY21 to over 36 million, it said.
“Inferring from these historical numbers and taking into account the expected uptick in capacity utilisation post-pandemic, we forecast Zimbabwe customer count to increase at a rate of 8,2 percent over the next five years.
“We believe our forecasts are more on the conservative side considering the Group is looking forward to rollout about 87 new stores in FY23 alone,” IH said.