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Hartleys initiates coverage of Yowie Group (YOW) with a "speculative buy" recommendation and a target price of $1.20.
"Yowie Group (YOW) may be on the cusp of a successful launch of its Yowie confectionary brand into the US.
This would move YOW from essentially a concept, to a genuine early stage growth business.
The three pillars of the YOW business are firstly the product, similar to a Kinder egg, which has a proven sales record in a developed confectionary market (Australia).
Secondly, Kinder eggs are banned in the US because the plastic toy/insert hidden in the chocolate egg is regarded as a choke risk.
Finally, YOW has exclusive access to a US patent for three years, that essentially circumvents the Kinder ban (because the insert is visible). Currently Yowie is being sold in 1505 Wal-Mart stores. Wal-Mart electing to extend sales of Yowie to its national store network would represent a significant milestone.
Our entire earnings model is premised on YOW achieving a national store roll-out with Wal-Mart.
Should YOW not be able to achieve this we would significantly reduce our estimates."
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