This report is an updated version of the report published on 07 February 2025 at 11:59 AM AEDT.

Domino’s Pizza Enterprises Limited (ASX: DMP)

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.

Recommendation Rationale – SELL at AUD 36.68

• Overvalued Multiples: On a forward 12-month basis, the stock is trading at an EV/Sales multiple of 1.8x vs industry (Consumer Cyclicals) median of 0.9x.
• Trading Update: In Asia, same-store sales decreased by 4.2% YoY in 1HFY25, while Network sales fell by 8.4% YoY. The Group experienced a $28.6m FX translation headwind on Network Sales, in addition to an AUD 33.8mn decline driven by store closures.
• Decline in Cash Balance:  At the end of 30 June 2024, the company reported cash balance of AUD 87.6mn, down from AUD 159.9mn as at 30 June 2023.
• Emerging Risks: The company faces risks from market volatility, inflationary pressures, regulatory constraints, technological changes, and broader macroeconomic shifts.

DMP Daily Chart

Valuation Methodology: EV/Sales Approach (FY June'25E) (Illustrative)

Considering the cost-saving initiatives, restructuring program, revenue growth in FY24, same-store sales (SSS) growth, new product launches, etc., the stock might trade at a slight premium to its peers. For valuation, a few peers like Collins Foods Ltd (ASX: CKF), Flight Centre Travel Group Ltd (ASX: FLT), Corporate Travel Management Ltd (ASX: CTD), and others have been considered. Given. Considering that the stock is approaching its R2 level, sharp rally in share price, current trading level, and risks associated, the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current price of AUD 36.68 (as of 7 Februrauy 2025, at 11:00 AEDT).

Note: This report may be updated with details around fundamental and technical analysis, price/ chart in due course, as appropriate.

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 07 February 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: Dividend Yield may vary as per the stock price movement. 

Note 5: 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.