Bellamy's Australia Limited

BAL Details
· Takeover activity in the sector: Bellamy’s Australia Limited (ASX: BAL) stock rose over 7.48% on February 06, 2017 which may be due to investors charging back into the stock. This might be influenced from the takeover activity in the sector wherein the leading U.S. baby formula business, Mead Johnson, has received a takeover offer at about 30% premium to the market valuation from Reckitt Benckiser. The activity seems to be boosted by the growing Chinese demand while the growth prospects are expected from rising birth rates as the one-child policy has now been ended. Moreover, BAL’s peer, a2 Milk Company Ltd, had also reported for phenomenal sales growth. BAL in the 1H 2017 expects the sales to be in the range of $115m to $120m and the FY17 revenue is expected to be in the range of $220m to $240m. BAL’s profit after tax in 1H17 is expected to be between 6% and 9% of revenue, reducing to 4% to 6% in 2H17 owing to impact from lower sales volumes, shortfall payments, interest expense on borrowings, etc.

· Recommendation: BAL stock has fallen over 61.09% in the last three months (as of February 03, 2017), placing them at reasonable P/E. We give a “Hold” recommendation at the current price of – $ 4.60

Domino's Pizza Enterprises Limited

DMP Details
· Completed the acquisition of Germany’s Joey’s Pizza: Domino’s Pizza Enterprises Limited (ASX: DMP) stock fell over 4.75% on February 06, 2017. On a recent surcharge related issue, the group has clarified that no evidence has been seen in support of comments on relation between its share price and introduction of Sunday surcharge. However, DMP has completed the final stages of its acquisition of Germany’s Joey’s Pizza, by completing the final conversion of the acquired stores to a Domino’s franchise, which is six months ahead of schedule. DMP is focused on expanding the network in Germany even further, and adding organic growth through locally-inspired menu offerings and the best customer service platforms available in the market. Moreover, DMP has reaffirmed guidance for Same Store Sales in Europe at +5 to +7%, and projected the record organic new store growth for the region in 2017.

· Recommendation: DMP stock has fallen over 15.86% (as of February 06, 2017) in the last six months. The stock is on a downtrend from the past six months and is trading at an unreasonable P/E. We give an “Expensive” recommendation at the current price of – $ 58.40

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