LONDON, February 26, 2016 /PRNewswire/ --
Yowie Group's retail revenues rose 29% on a sequential basis in the December quarter to an estimated US$6.2m as the company completed its roll-out to 4,300 Walmart stores in the US. December quarter numbers include both retail and stock-building sales, so we are maintaining our top-line expectations for now. However, based on the company's recent move to a new contract manufacturer and the resulting discontinuation of patent royalty fees, we believe there may be upside to our estimates.
The shares have dropped about 42% since our initiation in September 2015, which we believe reflects overall market weakness, along with the 16% increase in shares outstanding. A reverse DCF at the current price with a WACC of 10% implies compound average revenue growth from FY16 to FY18 of 70%, fading to terminal growth of 2% and a terminal EBIT margin of 14%, a margin we believe may be achievable by FY18. There is nothing in our forecasts for roll-out to other geographies, which would present further upside. We also believe that 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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