2011 Media Releases

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) has initiated coverage of Domino’s Pizza Enterprises (ASX: DMP) with a Buy recommendation.

Research analyst Raymond Gonzalez said, “In our view, Domino’s Pizza Enterprises offers good value on a risk reward basis.

“While the fast food segment in which it operates is considered very competitive, we believe Domino’s Pizza Enterprises has demonstrated its ability to deliver earnings growth in such conditions."

Domino’s Pizza Enterprises is the master franchise license holder of the Domino’s Pizza brand in Australia, New Zealand, France, Belgium and the Netherlands and the largest franchisee of the brand outside of the US. Domino’s Pizza Enterprises operates a hybrid model consisting of company-owned and franchised stores with 535 stores in Australia and New Zealand as at January 2011.

Gonzalez said, “We believe Domino’s Pizza Enterprise’s franchise model is a low risk business model which requires very little working capital and does not carry the leasing risk on stores nor require inventory.

“With the number of stores in Australia and New Zealand increasing – we expect 588 in 2013 – we expect Australia and New Zealand to be the key driver of earnings growth in the medium-term underpinned by more stores and more revenue per store driven by broader menus and online ordering.”

In contrast to most retail business models, Deutsche Bank sees the internet as an opportunity for Domino’s Pizza Enterprises to grow earnings through increased basket size, special offers and potentially lowering advertising costs. The analysts said scale would also give the company an advantage over small independents through the ability to invest more in given online strategies.

Key risks identified include short-term delays to the company’s European rollout and corporate store sell down, promotional activity and competition plus broader risks such as changing consumer tastes and attitudes and government legislation.

Looking forward, Gonzalez said, “We see no reason why Domino’s Pizza Enterprises 3-year growth rate should differ materially from the last three years which saw 20% compound annual growth rate. Therefore we believe its medium-term earnings growth should support its current valuation into the future.”

For further information, please contact:

Deutsche Bank AG    
Name: Camilla Herring   
Phone: +61 (0) 2 8258 2731
E-Mail: camilla.herring@db.com