A consumer discretionary company, Domino’s Pizza Enterprises Limited (ASX: DMP) announced binding agreement to acquire the Master Franchise Rights for Domino’s Pizza in Denmark and assets formerly owned by Domino’s Pizza Scandinavia A/S (“DPS”) for approximately €2.5 million.
Domino’s Pizza Scandinavia had ceased operations and entered administration in early March 2019.
Completion of each store asset package is expected to occur progressively during April and May 2019, where it is conditional on lessor consents to the assignment of the relevant store lease.
Around 5.7 million people reside in Denmark, and the country is complementary to DMP’s existing portfolio of Domino’s Pizza territories in Europe and represents an additional growth platform for its operations in Europe. DMP management has assessed Denmark as having a market potential of approximately 150 franchised and corporate stores.
DMP will enter Denmark according to a Master Franchise Agreement with Domino’s Pizza, Inc. (“DPI”) for up to 25 years (comprising an initial term of 15 years with an option to renew for a further 10 years).
DMP expects to restart operations in Denmark with approximately 20 stores within the next year. The company will use its business know-how to carefully reinvigorate operations in Denmark, which will be led by senior executives within DMP Europe who will relocate to Denmark.
Re-establishing operations will require additional investment in store equipment, IT systems and other central support. The impact on FY19 underlying earnings per share is not material. As a small territory initially, the Denmark business will take some time to contribute to the earnings.
DMP continues to evaluate other acquisition opportunities globally as well. In another update, voting power of FIL Limited and the entities (a substantial holder of DPE) changed from 12.65% to 9.01%.
On April 5, 2019, Domino’s Pizza Japan launched two new ranges with 11 new pizzas with an aim to reach new customers on various occasions. The Chief Executive Officer of Domino’s Pizza Japan, Josh Kilimnik commented that the new American Classic range products will change the traditional view in Japan. There was a widespread view that pizzas were expensive, and only for specific occasions. The new pizzas is expected to change that view as it includes traditional American flavours like flavours from California’s West Coast as well as BBQ chicken from New Orleans and Philly Cheese Steak in Philadelphia. The major target for The American Classic range would be the 50% of office employees and workers who buy lunch at convenience supermarkets and stores at a starting price of just 799 Yen, less than the average lunch price of 900 Yen. With the launch, the company in addition to new customer acquisition would also expect good taste experience from its existing customers.
On the stock information front, at the time of writing (on 10th April 2019 AEST: 02:02 PM) the stock of Domino’s Pizza Enterprises was trading at A$44.170, up 2.625% with a market capitalisation of ~A$3.69 billion. Its current PE multiple is at 31.81x, and its last EPS was noted at A$1.353. Its annual dividend yield has been noted at 2.61%. Today, it made day’s high at A$44.35 and day’s low at A$42.96, with a daily volume of 145,444. Its 52 weeks high stands at A$57.8 and 52 weeks low at A$38.1, with an average volume of 344,274. Its absolute return for five years, one year, six months, and three months are 118.37%, 5.31%, -13.64%, and 2.55%, respectively.
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