http://www.marketwire.com.au/broker...yowies-fiscal-2017-earnings-forecasts-by-156/
Morgans upgrades Yowie’s fiscal 2017 earnings forecasts by 156%
June 8, 2016
After a strong run in the latter half of 2015, shares in Yowie Group fell out of favour in the first quarter of 2016, falling sharply from $1.10 to trade as low as 52 cents at the start of April. However, in the space of a month its share price doubled to $1.07 and continued to trade in that vicinity for the remainder of May and into June.
The rebound could be attributed to the group’s success in reaching agreements with major retail chains for the distribution of its products into various high-volume US markets. Analysts at Morgans CIMB highlighted on Wednesday morning that Nielsen data showed Yowie was the number one bestselling item in the US ‘Chocolate and Novelty Immediate Consumption’ category.
The broker underlined the importance of the data in terms of indicating the value of Yowie to retailers, a factor that has been instrumental in its success in growing its potential points of sale to approximately 60,000 stores. Morgans also highlighted that it is a high margin product for retailers, an added incentive to stock the item and display it in prime locations.
The latest deal negotiated by Yowie was a three-year licensing agreement for YO-KAI WATCH. This is a Japanese franchise with similar characteristics to Pokémon that has sold more than US$2 billion of retail merchandise in Japan over 15 months.
Morgans noted that the launch of YO-KAI WATCH in the US will be supported by merchandise partners across television, video, comic books and toys, providing free marketing assistance for Yowie.
Following recent developments the broker upgraded its revenue forecasts for fiscal 2017 from US$28.5 million to US$35.2 million. Sales growth of 80% is forecast in fiscal 2018 with net profit increasing strongly to $7.6 million, representing earnings per share of US$0.035 cents.
Morgans is tipping earnings per share to double in fiscal 2019, which in Australian dollar terms would equate to circa 9.5 cents. This implies a forward PE multiple of 10.6 relative to yesterday’s closing price of $1.01, which for long-term investors appears reasonable if the company can achieve the exponential growth that the broker is forecasting.
Morgans is forecasting Yowie to generate compound annual sales growth of more than 90% between fiscal 2016 and fiscal 2019 inclusive. Consequently, if the company can operate efficiently and achieve the long run double-digit margins the broker is anticipating, the earnings will materialise.
Morgans upgraded the group’s fiscal 2017 and 2018 earnings per share forecasts by 156% and 45.6% respectively while increasing its price target from 95 cents to $1.28. This implies upside of 27% to yesterday’s closing price and supports its add recommendation.
(20min delay)