Edison Issues ADR Update on Yowie Group

04 May, 2016, 11:38 ET from Edison Investment Research

LONDON, May 4, 2016 /PRNewswire/ --

An investor day at Yowie's new manufacturing facility on 25 April revealed a smooth relocation and the successful production of its first in-licensed product - Angry Bird character Yowies - to coincide with the upcoming Angry Birds movie in mid-May. Retail revenues rose another 29% on a sequential basis in the March quarter, to an estimated US$8m as the company filled reorders from existing customers and new customers including Walgreens. Volumes appear in line with our estimates so we are maintaining our top-line expectations for now. We will revisit our forecasts after the FY16 results in September when more information is available on the reduction of patent royalty fees resulting from the new contract manufacturer, as well as any additional cost savings.

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The shares have risen 48% since our February update, which we believe reflects a modest bounce back in equity markets in general and Yowie's continued strong sales performance. A reverse DCF at the current price with a WACC of 10% implies compound average revenue growth from FY16e to FY18e of 70%, fading to terminal growth of 2% and a terminal EBIT margin of 22%. There is nothing in our forecasts for roll-out to other geographies, which would present further upside. We also believe there is a real opportunity for investors as Yowie demonstrates that it can move beyond confectionery into licensing the brand for other products.


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