The company has announced that it has entered into a binding agreement to acquire the Pizza Sprint chain of 89 stores in France. This will bring the total number of stores in France to approximately 330 and provide significant effect on benefits in terms of the efficiency of the franchise system and logistics in the French market. Resulting from this acquisition, the company is increasing its future store count forecast in Europe from 1350 stores to 1500 stores. The initial cash consideration is € 31.5 million with a further amount of € 3.5 million in instalments based on the fulfilment of certain criteria. The acquisition is expected to be immediately EPS accretive by around 4% with the acquired business generating EBITDA of approximately € 3.5 million in FY 2015.
Store Count, Sales and EBITDA (Source: Company Reports)
Pizza Express is a leading chain of 89 stores in the west of France comprising of 12 corporate stores and 87 franchised stores. The business generated network sales of approximately € 30.4 million and EBITDA of approximately € 3.5 million in its latest year ended 31 March 2015. The acquisition is expected to consolidate the position of the company as the largest pizza chain in the French market, and the close proximity of the stores to the company commissary in Vertou in addition to complementing the existing stores will maximise efficiency in distribution and logistics.
DMP Daily Chart (Source: Thomson Reuters)
The bottom line of the company is forecast to grow at 25.6% annually for the next two years. However, the share looks expensive to us because the trailing P/E ratio (63.77x) is around four times the average on the ASX. We believe that investment should be avoided at the current time and at the current price.
Tabcorp Holdings Limited (ASX: TAH)
The highlights of the results for FY 2015 show a 157.5% growth in NPAT to $ 334.5 million with contributions from continuing operations before significant items growing 14.7% to $ 171.3 million and net benefits from significant items after tax of $ 163.2 million. Statutory EPS of 42.5 cents per share is up by 146.5% and EPS from continuing operations before significant items grew by 9.6% to 21.7 cents per share. The full year ordinary dividend fully franked of 20 cents per share is up by 25% and, in addition, a special dividend of 30 cents per share fully franked was paid in March. The target for FY 2016 is to increase the dividend payout to 90% of NPAT before amortisation of the Wagering and Betting Licence. EBITDA from continuing operations before significant items was up by 4.5% to $ 508.1 million largely because of strong Wagering and Media performance and continued control of expenses. The ACCTAB acquisition has been completed and is on track for integration for FY 2016. The significant items of $ 163.2 million comprise tax benefits from the Victorian wagering and gaming licence payments, the NSW Trackside payment and associated interest income.
Divisional Results (Source: Company Reports)
The results are undoubtedly impressive but we believe that the stock is overvalued at the current price. In addition, Tabcorp needs to settle the claim by the Australian Transaction Reports and Analysis Centre (Austrac) which alleged that TAH committed more than 100 separate breaches of the law. This included betting plunge on an NRL Cowboys versus Bulldogs game in 2010. Tabcorp has filed its defence and confessed that it had failed to inform the government about numerous suspicious transactions. The company is ready to fight most of the charges against it and the potential fine of $17 million. Based on the above, we give an Expensive recommendation for the stock.
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