Domino’s Pizza Enterprises Ltd

DMP Details

Stock surging on news of snapping “Hallo Pizza”: Domino's Pizza Enterprises Ltd.’s (ASX: DMP) stock surged 3.5% on October 19, 2017 as the group announced that its German JV entities, Domino’s Pizza Deutschland GmbH and Daytona Germany GmbH (together, ‘Domino’s Pizza Deutschland’) have executed a sale and purchase agreement to acquire the Hallo Pizza chain of pizza stores in Germany for €32 million on a cash and debt free basis. An additional €20 - 30 million of cost is estimated to be incurred by Domino’s Pizza Deutschland over the next c. 24 -36 months with regards to integration, re-branding, store conversion and transaction costs. Aggregate cost to the group is of the order of €35-42 million. Moreover, the deal is expected to strengthen DMP’s market position by increasing the store count from 209 to approximately 300-340 and is expected to result in meaningful operating leverage. 
 
Hallo Pizza Business Plan (Source: Company Reports) 

However, based on the expected timing of completion and realisation of synergies, the deal will only have a small positive contribution to DMP’s FY18 underlying earnings. Additionally, the acquisition is expected to close in early calendar 2018 after the satisfaction of conditions precedent. Meanwhile, DMP stock has fallen 13.74% in the last three months as on October 18, 2017 at the back of challenges faced by the group in the past. The group’s valuation still looks high and we give an “Expensive” recommendation on the stock at the current price of  $49.35



DMP Daily Chart (Source: Thomson Reuters)

Yowie Group Ltd

YOW Details

Expanding footprint with the launch of product in Canada:Yowie Group Ltd.’s (ASX: YOW) stock has fallen over 56.7% in last six months as on October 18, 2017 at the back of lower than expected performance and interim trading challenges. On October 19, 2017, YOW has reported a 7% fall in the group sales revenue to US$4.58m in the first quarter 2018. This is due to the one-off hurricane-related sales impacts in two key States of biggest US retail customer and impacted by the timing of innovation launch and related merchandising in 2018 versus 2017. However, the group’s new US products are expected to deliver a full trading contribution in the remaining period of FY18. The company has achieved 55% in Q1 2018 versus 53% in 2017. Moreover, YOW was able to execute the innovation plan through the launch of the Rescue Series 3, and Discovery World in the US towards the end of the first quarter. In addition, YOW has continued its retail expansion in Australia and completed an initial shipment into Canada through the new partnership with Monteux Confectionery Inc. YOW’s Q1 innovation combined with Q2 2018 marketing programs has put the group in a strong position to be able to grow in the remaining quarters of 2018.
 

Net sales revenue compared to previous years (Source: Company Reports)
 
Additionally, YOW’s FY18 outlook remains unchanged at 55%+ net sales growth, with company’s aim to generate positive EBITDA before share-based compensation by the fourth quarter. Furthermore, YOW’s recent launch of YOWIE product in select Canadian retail outlets is expected to extend the branding company’s expansion into markets outside of the U.S. Based on the foregoing mixed performance and past trading scenario, we give a “Speculative Buy” recommendation on the stock at the current price of $0.22



YOW Daily Chart (Source: Thomson Reuters)

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