McDonald’s Looks To South Africa & India As The Next Growth Engines
McDonald’s Corporation (NYSE:MCD) is lining up investments in South Africa and India as it looks to increase its penetration in these countries which has traditionally lagged behind that of China. McDonald’s comparable restaurant sales growth in May disappointed with APMEA (Asia/Pacific, Middle East and Africa), in particular, declining 1.7%. After gaining more than 40% in 2011, McDonald’s stock price has declined by about 10% in 2012.
We have a $98 price estimate for McDonald’s, which is about 10% higher than the market price.
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Doubling Revenue in South Africa
In South Africa, McDonald’s looks to double its revenue in next four years by opening at least 25 restaurants each year. The company is looking at regions in North West province and North West Cape, where the restaurant chain has a low presence. The fast food chain has an agreement with the franchising company, Shanduka, to run all McDonald’s restaurants in the country for the next 20 years.
Currently, McDonald’s has 163 restaurants in the country, [1] and it’s not alone in its pursuit to expand into Africa. Yum! Brands plans to add 130 KFC restaurants in the continent in 2012, which will see its tally reaching 1,000 restaurants. [2]
Doubling Restaurants in India
In India, McDonald’s plans to add 250 new restaurants in next three to five years at an investment of Rs 750 crore (~$140 million). The company also plans to raise the procurement of potatoes from the state of Gujarat from 30,000 metric tonnes (MT) to 50,000 MT. Presently, McDonald’s has around 250 restaurants in India, so the number of restaurants is set to double by 2014-15. [3] All in all, McDonald’s plans to incur capital expenditure of around $2.9 billion in 2012, the half of which will be used to open new restaurants.
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Notes:- McDonald’s SA looking to double revenue in four years, bizcommunity.com, June 19, 2012 [↩]
- Yum Brands sees 130 new Africa stores in 2012: report, reuters.com, February 3, 2012 [↩]
- McDonald’s to open 250 new outlets in 3 yrs, thehindubusinessline.com, June 19, 2012 [↩]