In today’s daily we have covered stock research on Dominos Pizza (Expensive). To view list of dividends click here

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S&P 500 was up 4.21points or0.22%on Tuesday and closed at 1941.99 U.S. stocks rose modestly on Tuesday afternoon, recovering from morning declines though investors kept watching the turmoil in Iraq as the Federal Reserve began a two-day policy meeting. The latest economic data showed that housing starts and building permits fell more than expected in May, though the overall Consumer Price Index rose 0.4 percent, the biggest gain in more than a year.

Among Asian stock markets the Nikkei 225 in Tokyo rose 0.3% but the Shanghai composite fell 0.9%, its biggest one day drop in a month. Gold was down $1 at $1270 an ounce. With energy prces now on the rise due to heightened geopolitical risks and tight global supply of crude oil, some increases in retail gasoline prices in the months ahead look probable.


S&P 500 Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was down by 11.6 points or 0.21% on Tuesday and closed at 5400.7 points. South African retailer Woolworths has secured shareholder approval to proceed with its $2.2 billion takeover of David Jones. Royal Dutch shell has reduced its stake in Woodside petroleum to 13.6%. With iron price falling 34% this year, Fortescue Metals is offering the highest discount since GFC to Chinese steel mills. Isentia Group announced the substantial shareholding of CBA with a voting power of 7.30%. OZ Minerals announced the substantial shareholding of NAB with a voting power of 5.29%. 


ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – Domino’s Pizza (DMP)
 
DMP recently appointed Jack Cowin to its board as chairman. We view this appointment as a very strong addition to the board. He brings 45 years of experience in the Australian quick service restaurant industry. He is an industry doyen , owning Hungry Jacks (the burger king franchise in Australia) and previously owning the KFC franchise rights in Western Australia 


Domino’s Store (Source – Company Reports)

He strengthens an already exemplary board and management team, which has strong experience in food retailing and entrepreneurship, which is highly relevant to Domino’s strategy of rolling out new stores and expanding overseas. A family trust structure set up by the chairman holds more than 18.5 million shares (or 27.8% of the company). The stock is currently overvalued as the market assumes a more optimistic store rollout in Japan and Europe than management’s long term targets.


DMP Financial Highlights (Source – Company Reports)

Despite domino’s emerging leadership in the fast casual restaurant category, we maintain it does not have many competitive advantages as fast casual restaurants do not have any switching costs with intense industry rivalry and low barriers to entry. Longer term Domino’s may develop significant competitive advantages but that is likely to take more than a decade.
 


 DMP daily chart (Source – Thomson Reuters)

It is possible that the offshore strategy succeeds faster than expected, rapidly increasing returns on capital and strengthening the case of having the competitive advantage being the low cost provider. As a brand promoter and marketer Domino’s conducts extensive advertising and promotional campaigns. It is conceivable that the brand equity develops to a point where the company can charge a premium.We believe the stock is slightly expensive at its current price and would review the stock at a later date.

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