Yowie Group Ltd
Yowie Group Ltd is operating as a brand licensing company in the United States. It owns and uses intellectual property rights in the outsourcing of the manufacturing and distribution of the Yowie chocolate confectionery product, as well as in the development of Yowie digital platform, and Yowie branded licensed consumer products. Headquartered in Perth Australia, Yowie confectionery is a character-moulded chocolate inclusion product. The company has released its quarterly activities report for the period ending 30 June 2015. The highlights include its confectionery products which are scheduled for a roll out nationally in the United States across around 4300 Walmart stores from August 2015. It has successfully completed a small 12 store trial in a tier 1 grocery retail account in Dubai in the Middle East. Quotations have commenced for its ADR on the OTC platform in the US.
Yowie Characters (Source - Company Reports)
The rollout across the entire Walmart network is the result of a consistent performance in sales the short time of 11 months between the 50 store trial, of the high expectations from Walmart for the group. Locations will be in prime in store areas and promote impulse purchases by providing prominent front-end exposure. The next step in Dubai will involve expansion of the trial across more stores and details are being worked out. The Middle East is one of the fastest growing chocolate markets in the world and is set for a compounded annual growth in excess of 6% between 2014 and 2019 compared to the global growth rate of just over 2% in the same timeframe. The top priority for the group remains building a strong focus sales and distribution platform in the US to ensure that accounts are serviced in an optimum fashion.
Yowie Organisational structure (Source - Company Reports)
After the end of the quarter, the company has embarked on a partnership project American Association of Zoos and Aquariums in which it will launch a product sampling exercise across the 229 accredited members of the Association. Institutions accredited by the Association provided $ 160 million in 2013 for around 2700 projects in more than 115 countries and, in 2014, accredited members attracted more than 183 million visitors.
Yowie Share Price (Source - Company Reports)
In corporate developments, the group arranged for the quotation of its ADRs through a sponsor program through BNY Mellon. The ADR will represent 1 ADR for every 10 ordinary ASX listed shares. As at 30 June 2015, the company held cash and cash equivalents of $ 11.1 million.
Yowie Daily Chart (Source - Thomson Reuters)
Group shares have gained in the last few months because of the successful rollout in the US and the question now arises to assess the potential of the company which produced a net loss of around $ 1 million in its last half year. One key factor in favour of the company is that it has the exclusive right to certain US patents until 2019 which allows FDA approved production of "non-embedded chocolate inclusion products" and this keeps out the company's major competitors such as Kinder Surprise and the Ferrero group of Italy. The company' s Florida facility which has a capacity of 20 million Yowies every year is currently producing 7 million with the capability of upgrading to 100 million. We believe that the prospects in the US make this an attractive investment and would rate the stock as a Buyat the current price of $1.15.
XERO FPO NZ
At its annual meeting, the company announced that it has 540,000+ subscribers and subscription revenue grew by 81% in FY 2015 to touch $ 121 million while ACMR was $ 159 million. As at 31 March 2015, capital raised was $ 147 million and cash resources for investment amounted to $ 269 million. The company has been scaling is platform and the headcount is now in excess of 1200 with 403 people added in FY 2015. The transaction value processed the last 12 months was more than $ 300 billion and there were more than 16,000 partners with 28% being added in FY 2015. In contrast, less than 7% of all SAAS providers have more than 10,000 users.The early outlook for FY 2016 is an expectation for the full year to 31 March 2016 of subscription revenues in excess of NZ $ 200 million. The company would still like to list on a US stock exchange, the timing will be decided by various internal and external factors and only after the release of the results for FY 2016.
The company has several distinctions which differentiate it from the competition. It is the first global accounting solution that people truly like and appreciate. The TAM is substantial and expanding rapidly generating significant new revenue opportunities. This is the first global small business accounting platform which is available on the cloud. The company has already demonstrated a successful global strategy and proven execution of this strategy.
We believe that the current share prices represent a buying opportunity which is highly attractive to say the least for several reasons. The first is the breakneck growth rate and the blue sky potential. Blue sky potential is an important consideration in investing in a company which is still unprofitable and, though the New Zealand market is maturing, there are plenty of growth opportunities in Australia and the company has barely made an impact on markets in the US and the UK. Even a modest number of customers in these places would represent a huge increase in sales because of the size of the potential markets. In addition, there is not inconsiderable first mover advantage in the cloud space.
Another important factor is the speed and the degree of innovation that the company demonstrates. The recent initiatives announced by the company include a partnership with Dropbox allowing files stored there to be directly imported and worked on in Xero and the capability of creating invoices and quotations directly from Gmail. Clearly, the company is working on a road map to integrate its platform with other relevant services to make itself indispensable to its users. The company has also unveiled an initiative with Apple to provide new solutions to run on IOS for mobile devices.
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Xero Daily Chart (Source - Thomson Reuters)
Given the growth of the company in the past few years and the enormous opportunities which we believe lie ahead of them, we would have no hesitation in recommending a Buy at the current price of $14.50..
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