Coca-Cola Amatil Ltd

CCL Details

Shares of Coca-Cola Amatil (ASX: CCL) have fallen 3.4%, after Domino's has cancelled its contract in favor of Pepsi as its soft drink supplier. As per few media reports, CCL is losing a supply contract with Australian pizza giant Domino's Pizza Enterprises Ltd (ASX: DPM) and Domino's will switch to Pepsi from September 2017. Recently, CCL has signed agreements with Charter Hall for the sale and leaseback of its Richlands manufacturing and warehousing facility in Queensland. The sale will settle on 1 December 2017, delivering proceeds of approximately $156 million and resulting in a one-off gain of approximately $100 million before tax. The 20-year leaseback of the Richlands facility will commence on 1 December 2017 and has two extension options of five years each. Amatil also has a right of first refusal on the sale of the property. It is expected that this one-off gain will be substantially realized as profit after tax due to the utilization of capital losses. This will be recognized in Amatil’s results in the second half of 2017, and be treated as a non-trading item. As previously stated, the one-off gain from the sale of Richlands will offset one-off restructuring costs related to cost optimization programs in Australian Beverages in 2017, which will also be treated as a non-trading item.  On the other hand, CCL’s buy-back program is moving on track. The stock has declined by 13.7% in the last three months (as on July 06, 2017) owing to intensifying competition in the industry. We give a “Hold” recommendation on the stock at the current price of $8.91


CCL Daily chart; (Source: Thomson Reuters)

Domino's Pizza Enterprises Ltd.

DMP Details

During H1FY17, Domino's Pizza Enterprises Ltd (ASX: DMP) reported 9.4% yoy growth in Same Store Sales (SSS) revenue driven by business improvement across Australia, New Zealand, Belgium, France, Netherlands, Japan and Germany. Notably, 26.8% yoy growth in Network Sales to more than $1 billion ($1,166.1m) for the first time in the company’s history, driving a +21.1% increase in group revenue to $539.4m.  Domino’s ANZ network delivered again in H1 17, with +23.9% growth in underlying EBITDA to $55.2 million, with 17.2% growth in revenue to $150.1m. Trading results following the introduction of a Sunday surcharge to allow for higher wages for employees working on Sunday also aided the growth. The company has upgraded both underlying EBITDA and NPAT guidance for FY17 to be in the region of +32.5% growth, following a +33.6% lift on the prior corresponding period (pcp) in underlying EBITDA to $116.2m, and a +30.8% increase (pcp) in NPAT to $59.7m. DMP stock fell over 20% in the last six months, while it was down 23.5% in the last one year (as on July 06, 2017). Despite the modest performance in H1FY17, given the rising competition and margin pressure in the industry, we give an “Expensive” recommendation on the stock at the current price of $51.92


DMP Daily chart; (Source: Thomson Reuters)

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