Domino’s Pizza Enterprises Limited (DMP)
Student Research: This report is published for educational purposes only by students competing in the La Trobe Investment Research Challenge. 19th June 2012

Fast Food Industry 19 June 2012 La Trobe Investment Research Challenge

Ticker: DMP Price: $9.7 EPS FY (c) 0.31 0.33 0.38 0.44 0.46 DPS (c) 0.22 0.23 0.27 0.31 0.32 Franking (%) 100 100 100 100 100

Recommendation: HOLD Target Price: $10.67 P/E (x) 29.81 29.14 25.29 22.26 21.22 Dividend Yield (%) 2.38 2.40 2.52 2.72 2.74

2011A 2012E 2013E 2014E 2015E

Investment Summary
We initiate coverage of Domino’s Pizza Enterprises Limited (DMP) with a hold recommendation and a target price of $10.67 using Discounted Cash Flow Valuation (DCF), offering a 10% upside from current stock price at $9.70 on 19th June, 2012. As DMP operates in regions with different levels of risks, growth and margins, our estimation of revenue is based on top down approach considering the market share in these regions. We believe DMP may offer a long term upside if it can successfully execute its business plan of opening new stores and maintaining its same store sales growth in Australia and New Zealand (ANZ) and France, Netherlands, and Belgium (Europe).

Highlights
Future growth driven by increasing store count: DMP currently owns over 900 stores, with the goal of opening 50-60 new stores per year over the next 5 years. Its franchise/corporate strategy allows a long-term target of 750 stores in ANZ over the next 5 years and 1250 stores in Europe over the next 15 years. Facing challenges in the highly competitive fast food industry in ANZ region and the Euro crisis zone, we expect the compounded annual revenue growth to be about 6% from FY11 to FY15.

Technology changing the way DMP does business: DMP has revolutionized the pizza delivery industry with 50% of business