A leading analyst has said that until there is greater certainty around its operation in Germany the market is likely to remain sceptical as to Domino Pizza Group’s long-term potential.
Simon French at Panmure Gordon said: “Domino’s will issue its Q3 IMS on Wednesday 2 October and we forecast 3% UK LFL sales growth compared to 3.7% in the same period last year. We look for confirmation that the revised German plans are on track. We reiterate our Sell recommendation and 380p Target Price.
“July trading was likely impacted by the very hot weather whilst August and September should have shown good growth despite the Olympics in August last year and mixed weather in September this year.”
Consensus forecasts are for £47.8m PBT (22.2p EPS) in 2013E rising to £56.9m PBT (26.8p EPS) in 2014E.
French said: “Our forecasts are broadly in line with consensus at £47.5m PBT (22.4p EPS) and £57.0m PBT (26.7p EPS). We expect no change to consensus expectations following the Q3 update.
“Domino’s trades on a 2014E P/E of 22.1x and yields 3.0%. Earnings growth will be c2% this year but is forecast to be c19% in 2014E which goes some way to justifying the current valuation.”
