DP Eurasia NV

DP EURASIA N.V. (LON: DPEU) is a Netherlands-based company, which is an exclusive master franchisee of the Domino’s Pizza brand in Russia, Georgia, Turkey, and Azerbaijan. The company is the 5^th largest master franchisee of the Domino’s Pizza brand, which is owned by Domino’s Pizza Inc.

Decent Financial Performance for the Year Ended 31^st December 2019

(Source: Results, Company Website)

Like-for-like growth of 13.1%, aided by the celebrity-endorsed Dürümos campaign and cluster-based pricing. Online like-for-like growth of 32.6%. The company has 17 store openings (incl. AZ & GEO), hurt by unusually high-interest rates in the first three quarters of 2019. The number of stores increased by 41 to 765 in FY19 as compared with the previous year (FY18: 724). Led by like?for?like growth and store openings, the company’s revenue increased by 14.4% and system sales were up by 21.8%. Excluding IFRS 16, the adjusted EBITDA increased by 12.6% to TRY 124.5 million against the previous year (2018: TRY 110.6 million). The adjusted net income (excl. IFRS 16) for the financial year 2019 stood at TRY 2.9 million versus an adjusted net loss of TRY 7.1 million in 2018.

Share Price Performance

Daily Chart as on 27^th March 2020, after the market closed (Source: Thomson Reuters)

On March 27, 2020, DP Eurasia NV shares closed at GBX 33.00, up by 2.33% per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 102.00/GBX 31.40.

Key Risks
Expiration or termination of an MFA (Master Franchise Agreements)due to a breach of the agreement or store franchise agreements may affect the Group’s business operationally and financially. Failure to identify key geographical areas to open stores may result in failure to meet future expectations. Market saturation may become significant in the future and could adversely affect system store sales growth. Macroeconomic and political developments in the world and Turkey, Russia and the other jurisdictions in which the Group operates may negatively affect the Group’s business, results of operations, financial condition, cash flows and prospects. The Group could be adversely affected by the global pandemic COVID-19.

Conclusion
The company has generated decent momentum across all the regions.Although the financial results had become stable, the performance of the global business stays disappointing. The group’s board has, therefore agreed to exit the markets in a systematic manner. The company is facing emerging headwinds and cost pressures. Regarding coronavirus (Covid-19), the situation remains fluid, and the company is taking the necessary precautions for the wellbeing of all the stakeholders.

Presently, the whole world is facing the biggest slowdown in productivity. Being a Restaurants and Bars company, DPEU needs to invest heavily in innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the company’s financial performance.

Therefore, based on the above rationale and above valuation, we have given a “Watch” recommendation at the closing price of GBX 33.00 (as on March 27, 2020), while we look for any upcoming catalysts in the near term.

VPC Specialty Lending Investments PLC

London, United Kingdom-based VPC Speciality Lending Investments PLC (LON: VSL) is an Investment trust that looks to generate attractive returns for the shareholders in terms of consistent distributable income and long term capital growth, in comparison with the comparative benchmark index backed by its philosophy of lending, backed by assets.

Recent News
On 24^th February 2020, SVS had acquired 17% of VPC from an undisclosed shareholder, taking its total stake in the investment trust to 18% of its total issued share capital.

Fourth Quarter for the period from 1^st January 2019 to 31^st December 2019 (Annual Letter)
The company completed the year 2019 with 11.34% of total NAV return and a 9.83% of total net revenue return,both representing full-year return records for the Group. The robust revenue returns were due to the positive performance of the balance sheet investments as the portfolio companies performed in line with underwriting. Capital returns included a mix of robust equity performance. However, most of the investments are structured with LIBOR (London Interbank Offered Rate) floors, which somewhat insulates the portfolio against declining interest rates.

Share Price Performance
 
Daily Chart as on 27^th March 2020, after the market closed (Source: Thomson Reuters)

On 27^th March 2020, VPC Speciality Lending Investments PLC’s share price closed at GBX 54.00 per share, an increase of 5.88 per cent share, as compared to the previous day’s closing price. The beta of the VSL’s share has been reported to be at 0.81. This basically implies that the volatility in the price of the company’s stock, is less than the volatility in the movement of the comparative benchmark index. The company’s Dividend Yield has been reported to be around 14.81 per cent. Stock's 52 weeks High and Low are GBX 83.22/GBX 49.33.

Key Risks
The company’s operations are also impacted by the uncertainty created due to the ongoing COVID-19as it is affecting the company’s supply chain and downward trends in the volumes. Other factors, such as global economic uncertainties and foreign exchange risk, are negatively impacting the company’s operational and financial performance. The Group operates in several credit businesses and the risk is one of the unexpected credit losses arising through either adverse macro-economic factors or systems and control failures in credit processes. Failing to meet regulatory requirements or expectations and/or deliver poor customer outcomes leading to potential customer detriment.

Conclusion
Despite continuing regulatory headwinds, the company had a decent performance in 2019.Overall, the company’s performance is cautiously optimistic about the coming year. Recently, the market volatility related to the coronavirus (COVID-19) outbreak has impacted the public equity exposure, which will have relatively minor capital impacts in the near term. In addition, the group expect the currency hedging costs to come down in the upcoming months. The hunt for yield is extremely competitive in an environment of low-interest rates. The company’s segments can be affected negatively due to economic and geopolitical risk uncertainties. The group faces a risk of fines and investigations which can impact the future growth as it operates in an industry which is subject to the adverse regulatory headwinds, breaches of which can be potentially fatal for the group. Presently, the global market is facing the biggest slowdown in productivity.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 54 (as on 27th March 2020), while we look for any upcoming catalysts in the near term.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.