May 2025 Household Spending Data Signal Positive Momentum for Food Services Sector

Company Overview

Company Overview: Domino’s Pizza Enterprises Limited (ASX: DMP) is one of the largest franchisees of Domino’s outside of the United States. The company holds the master franchise rights to Domino’s brand and network in various countries. Bega Cheese Limited (ASX: BGA) is an Australia-based company engaged in receiving, processing, manufacturing, and distributing dairy and other food-related products. It operates in two segments: Branded, and Bulk.  Kalkine’s Sector Report covers the Investment Summary, Sector Overview & Supporting Catalysts, Data Insights & Analysis, Financial Metrics, Financial Commentary, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on selected stocks.

Investment Summary

Sector Overview and Supporting Drivers

Australia’s Food Services sector includes restaurants, cafes, QSRs, caterers, food trucks, cloud kitchens and institutional dining. It is expected to grow at a CAGR of higher single digit percentage through the late 2020s. Fuelled by rising disposable income, tourism, demand for convenience, healthy/plant‑based options and tech integration (delivery, kiosks, digital menus), the sector supports diverse outlets from full‑service restaurants and independents to rapid‑expansion QSRs and ghost kitchens. Challenges include inflation‑driven costs, labour shortages and record insolvencies, though delivery platforms and cost‑saving innovation provide key resilience.

Sector Catalysts

Index Performance

Investment theme and stocks under discussion (DMP, BGA)

After understanding the sectors, let us now look at two companies from the Food Services sector listed on the ASX. The price potential of the companies under discussion have been analysed based on EV/Sales based relative valuation methods. 

1. ASX: DMP (Domino’s Pizza Enterprises Limited)

(Recommendation: ‘Speculative Buy’ at AUD 18.030; Potential Upside: Low Double-Digit; MCap: AUD 1.77bn)

DMP is one of the largest franchisees of Domino’s outside of the United States. The company holds the master franchise rights to Domino’s brand and network in various countries.

2. ASX: BGA (Bega Cheese Limited)

(Recommendation: ‘Speculative Buy’ at AUD 5.30; Potential Upside: Low Double-Digit; MCap: AUD 1.59bn)

BGA is an Australia-based company engaged in receiving, processing, manufacturing, and distributing dairy and other food-related products. It operates in two segments: Branded, and Bulk.

The stock has witnessed a correction of ~5.53% in last one month, and over the past six months, it has declined by ~8.15%. The stock has a 52-week low and 52-week high of AUD 4.080 and AUD 6.300, respectively and is currently trading above the 52-week high-low average. BGA was last covered in a report dated ‘4 May 2023’.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an Indicator nor a guarantee of future performance. 

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 10 July 2025. The reference data in this report has been partly sourced from REFINITIV. 

Note 3: Investment decisions should be made depending on an individual’s appetite for upside potential, risks, holding duration, and any previous holdings. An ‘Exit’ from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: - 

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.