Taking share. 2Q14 sales release. Earnings and target price revision. Price catalyst. Action and recommendation

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1 NEW ZEALAND RBD NZ Price (at 04:40, 17 Sep 2013 GMT) Outperform NZ$2.76 Valuation NZ$ DCF (WACC 9.4%, beta 1.2, ERP 0.1%, RFR 0.0%, TGR 0.0%) 12-month target NZ$ month TSR % Volatility Index Low GICS sector Consumer Services Market cap NZ$m day avg turnover NZ$m 0.3 Number shares on issue m Investment fundamentals Year end 28 Feb 2013A 2014E 2015E 2016E Revenue m EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking 1 % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x NZ imputation credits are only able to be used by shareholders to offset NZ income tax liability. RBD NZ vs NZSE50, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, September 2013 (all figures in NZD unless noted) 18 September 2013 Macquarie Securities (NZ) Limited Taking share Event 2Q14 sales release. Impact RBD 2Q14 sales were directly in line with expectation. While KFC same store sales were only modestly positive (+0.4%), this masked far strong transactional (and we believe) market share growth. The need to match competitor pricing at the value end of the market, and the accompanying change in revenue mix will result in lower margins and underpin our downgrade to FY14 numbers. Pizza Hut continues to trade strongly with double digit same store sales growth despite lapping a pcp that recorded 26.5% same store sales growth. 5 stores were sold to franchisees in the period. Starbucks delivered 5.8% same store sales growth, although total revenue was down reflecting the closure of 5 low volume stores since 2Q13. Carl s Jr delivered 2Q14 revenue of $4.3m, with the five stores now open trading slightly above our $60k average weekly target. Earnings and target price revision FY14 EPS lowered 6.9% reflecting lower KFC margins. Valuation tweaked from NZ$3.89 to NZ$3.99. No change to TP, though. Price catalyst 12-month price target: NZ$3.25 based on a PER methodology. Catalyst: KFC margins at the 1H14 result on October 17th Action and recommendation RBD continues to offer a defensive business model, with a strong balance sheet and sustainable dividend. While headline sales remain relatively subdued, we believe that KFC has made some significant market share gains (based on transaction growth) that can be leveraged once underlying trading conditions stabilise. RBD also offers a compelling growth opportunity in Carl s Jr. RBD is gaining valuable operating insight as it continues to open stores in NZ and has made considerable progress (albeit slower than RBD had hoped) in localising the supply chain. We expect RBD to continue to roll out new stores in NZ and to look to enter Australia within 12 months. While near term trading is likely to remain challenging, over the next twelve months we would expect investors to increasingly recognise the upside offered by Carl s Jr and for KFC to leverage market share gains into margin expansion. We retain the Outperform recommendation. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

2 Analysis RBD reported its 2Q14 sales, with Group revenue increasing 6.2% ($6.0m) to $102.1m. The largest contributor to the sales growth was Carl s Jr that contributed $4.3m in the period. KFC 2Q14 same store sales increased 0.4%, although lower price points masked strong transaction and market share growth. Total KFC sales increase 2.4% underpinned by the contribution of the 3 new stores opened since 2Q13. Fig 1 KFC same store sales trend Fig 2 Pizza Hut same store sales trend % growth % 2.0% 1.0% 0.0% 0.3% 0.7% 1.2% 0.2% 0.4% 35.0% 30.0% 25.0% 26.5% 28.6% 28.6% -1.0% -2.0% -3.0% -4.0% -3.5% -1.6% -1.9% -0.9% 20.0% 15.0% 10.0% 10.4% 18.3% 13% -5.0% 5.0% -6.0% -7.0% -6.4% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 0.0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Source: Company data, September 2013 Source: Company data, September 2013 Total 2Q14 sales for Pizza Hut were flat on pcp despite having 11 fewer stores trading. This reflected very strong same store sales growth of 13.2% on top of a 26.5% uplift in the pcp. This growth has been sustained by the $4.90 value offer and several successful promotions. Five stores were sold to individual franchisees in the quarter. Starbucks delivered same store sales growth of 5.8%, but with 5 fewer stores trading, total revenue in 2Q14 was 1.2% below pcp. Carl s Jr opened its fifth store in the period, in Rotorua. These stores delivered total revenue of $4.3m, suggesting average weekly sales of circ $65k. RBD confirmed plans to open 3 more stores in 2H14. The following table summarises forecast for RBD s 1h14 result scheduled for release on October 17 th. 18 September

3 Fig 3 RBD 1H14 forecast 1H13 1H14e $ var % change Revenue KFC % Pizza Hut % Starbucks % Carl Jr Total NZ Revenue % Other Total Revenue % EBITDA KFC % Pizza Hut % Starbucks % Carl Jr Total NZ EBITDA % G&A costs % EBITDA % Reported Profit % NPAT excluding non-trading % EPS adjusted % DPS % Payout ratio 72.6% 73.6% % Operating margins KFC 18.7% 18.0% Pizza Hut 6.4% 10.0% Starbucks 10.7% 12.5% Carl Jr 5.0% Total NZ EBITDA 16.2% 15.9% Source: Company data, Macquarie Research, September 2013 With KFC being forced to respond to the aggressive discounting in the market place, we have lowered our margin assumptions for FY14 and subsequently reduced FY14 NPAT forecast by 7%. 18 September

4 Fig 4 RBD FY14 forecast ($m) FY13 FY14e $ variance % change FY14 (old) Change in FY14 forecast Revenue KFC % % Pizza Hut % % Starbucks % % Carl Jr % % Total NZ Revenue % % Other % 0.0 Total Revenue % % EBITDA KFC % % Pizza Hut % % Starbucks % % Carl Jr Total NZ EBITDA % % G&A costs % % EBITDA % % Depreciation % % Amortisation % % EBIT before non-trading % % Non-trading EBIT % % Net interest expense % % Profit before tax % % Taxation % % NPAT continuing operations % % NPAT excluding nontrading % % EPS (cps) reported % 19.9 EPS (cps) excluding nontrading % 19.9 DPS (cps) % 17.0 Payout ratio 88.6% 92.2% 90% Tax Rate 26.2% 28.0% 28% Operating margins KFC 19.1% 18.3% 19.4% Pizza Hut 7.9% 10.0% 10.0% Starbucks 11.7% 12.7% 12.7% Carl Jr -26.4% 7.8% 3.0% Store numbers KFC Pizza Hut Starbucks Carl's Jr Source: Company data, Macquarie Research, September September

5 Interim Results 1H13 2H13 1H14e 2H14e Profit & Loss FY12 FY13 FY14E FY15E Feb y/e Feb y/e Operating Revenue Operating Revenue Total Unit Contribution Total Unit Contribution EBITDA EBITDA Depreciation Depreciation Amortisation Amortisation EBIT - before non-trading items EBIT - before non-trading items EBIT- after non-trading EBIT- after non-trading Net Interest Expense Net Interest Expense Pre-Taxation Profit Pre-Taxation Profit Taxation Expense Taxation Expense Profit after Taxation Profit after Taxation Discontinued Business Discontinued Business Reported Profit after taxation Reported Profit after taxation Tax-affected Non -Recurring Items Tax-affected Non -Recurring Items Pre Abnormal Profit after Tax Pre Abnormal Profit after Tax Adjusted Earnings Adjusted Earnings Adjusted for non-recurring items Divisional Unit Contribution 1H13 2H13 1H14e 2H14e Divisional EBITDA FY12 FY13 FY14E FY15E KFC KFC Pizza Hut Pizza Hut Starbucks Starbucks Carl Jr Carl Jr Total Unit Contribution Total Unit Contribution RBD share price $ 2.78 $ 2.78 Discounted Cashflow Valuation Profit and Loss Ratios FY12 FY13 FY14E FY15E PV FCFs Available to Owners PER (adj Earnings) Net Debt 13.0 EPS (adj Earnings) -cps Equity value EPS (Reported) - cps Shares Outstanding 97.8 DPS - cps Equity Value per Share $ 4.00 Revenue Growth 1.3% 4.5% 7.6% Includes PV Tax Losses EBIT Growth -5.9% 5.4% 30.4% EBITDA/Sales 13.4% 12.7% 12.8% 14.3% Assumptions Operating EBIT/Sales 8.6% 8.0% 8.1% 9.8% Risk free Rate 3.5% Effective tax rate 26.7% 26.2% 28.0% 28.0% Asset beta 0.9 Payout ratio 92.5% 96.8% 92.2% 72.0% Equity Risk premium 93.0% Enterprise value Target debt/venture 20% EV/Operating EBIT Nominal WACC 9.3% EV/EBITDA EV/Sales Terminal Year Assumptions EBIT (FY25) 80.1 Balance Sheet Ratios Real prices 2.0% ROE 30.9% 30.8% 29.6% 36.5% Real margin adjustment ROA 24.7% 23.2% 23.0% 28.0% Perpetuity growth rate 2% ROCE 28.3% 26.8% 29.2% 34.7% Net Debt Net Debt/Equity 22% 23% 26% 12% Net Interest Cover (EBIT) Price/NTA NTA per share $ 0.40 $ 0.42 $ 0.45 $ 0.53 EFPOWA Cashflow Analysis FY11 FY12E FY13E FY14E Balance Sheet FY12 FY13 FY14E FY15E EBDITA Cash Inc. in Working capital Receivables Net Interest Paid Inventories Tax Paid Investments Other Property, Plant & Equipment Net Cash in Op Activities Intangibles Other Assets Acquisitions Total Assets Capital Expenditure Asset Sales Payables Other Short Term Debt Investing Cashflow Long Term Debt Other Liabilities Dividend (ordinary) Total Liabilities Equity Raised Other Shareholders' Funds Financing Cashflow Minority Interests Total Shareholders' Equity Net Change in Cash (inc FX) Total Funds Employed Source: Company data, Macquarie Research September September

6 Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie First South - South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down % in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 30 June 2013 AU/NZ Asia RSA USA CA EUR Outperform 49.80% 57.68% 48.05% 41.13% 61.75% 47.10% (for US coverage by MCUSA, 8.12% of stocks followed are investment banking clients) Neutral 39.85% 24.45% 42.86% 54.70% 34.42% 30.89% (for US coverage by MCUSA, 6.60% of stocks followed are investment banking clients) Underperform 10.35% 17.87% 9.09% 4.17% 3.83% 22.01% (for US coverage by MCUSA, 0.00% of stocks followed are investment banking clients) Company Specific Disclosures: Risk Disclosure: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerrings by competitors.the results of operations may be materially affected by global economic conditions generally, including conditions in financial markets.the company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. Important disclosure information regarding the subject companies covered in this report is available at Analyst Certification: The views expressed in this research reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. 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