Dp Poland Share Discussion Threads

[a1samu] 20/11/2018 12:05

After being down almost 5% today to 26p, this is still heading towards 20-22p or lower. There is no cash or value in this share!(see my comments number 875 & 878.)

[the ghost who walks] 24/9/2018 17:41

Interested in any feedback from this. Thanks

[davidosh] 23/9/2018 00:37

The full line up for Mello in the City on Tuesday at 11am will be PTSG, Dominos Poland, Nichols, Fulham Shore and Judges Scientific all presenting for 40 minutes with lunch and drinks included. I have six places left so reserve a place via

[the ghost who walks] 22/9/2018 05:08

look forward, not backwards. Focus on value creation,

[rock star] 20/9/2018 10:16

The winners here have been the Directors. Their interests are disconnected with shareholders and have been for years. The share price reflects this.

[lbo] 19/9/2018 19:39

“bets in class” ? ROFLMAO

[the ghost who walks] 19/9/2018 18:02

Must say your copy and paste skills are not bets in class. Why not just copy the link for the full report.

[the ghost who walks] 19/9/2018 18:00

Haha hardman says it's undervalue don't overvalued!

[lbo] 19/9/2018 07:07

It's overvalued when compared with many comparison valuations and as Hardman points out there are still "RISKS" which also should be discounted on those valuations"In addition to all the generic risks all businesses face, DPP has some specific threats. In the short term, food prices can squeeze profitability. With some of the competition not using real cheese, a price hike cannot be readily passed through without losing some competitive edge. Also, as mentioned above, DPP protects its franchisees against sharp rises in important commodities, of which cheese is the most important, as it represents around 30% of the cost of making a typical pizza.All businesses face competition. DPP is no different, and has rivals with different strengths and weaknesses""One of the issues facing DPP when it is looking to grow its franchise business is finding suitable franchisees with finance to invest in a new store. The average cost of opening a new store is PLN 700k but, in addition to that, a franchisee needs to be able to fund the initial losses or low profitability. With its relatively short history of running a market economy, Poland does not have an enormous pool of budding entrepreneurs.""DPP has raised equity finance regularly through its short life to fund the development of the business. It is hard to raise debt without a bedrock of profitability, although it does use finance leases for equipment needed in the stores. On our forecasts, it will finish 2020 with its cash resources almost depleted, but right at the turning point of moving to positive cash generation. This might prove too tight"

[the ghost who walks] 19/9/2018 05:58

Value is a function of return on capital, growth and risk. Hard man report very good at quantifying that. Comparing to 25 stores in uk where you do not know the return on capital, growth, or risk, is not really satisfactory versus the detailed Hardman approach.

[bigboyo] 18/9/2018 20:45

Thank you to ADrunkenMarcus for the link to Hardman's report on DP Poland.

For me, the issue is not whether DP Poland will eventually make a profit, or sell millons of pizzas in Poland or whether there will be year on year growth.

The issue for me as an investor, is can I make money from this if I become a part owner (by way of becoming a shareholder)?

Hardman's report (page20) states that the current valuation of DP Poland corporate stores is £70m. This is on basis of a store by store valuation as given in their table with the most mature 10 stores being collectively valued TODAY at £21m.

Compare this to the recent value put on the 25 HIGHLY profitable London Dominos stores that the UK parent took a 75% stake in for £24m, (thus valuing the venture at £32m for 25 highly profitable mature London stores).

www.thetimes.co.uk/article/dominos-new-recipe-for-london-l3skdbk3f

--------------------------------------------------------------

AND from the Dominos UK presentation in 2018 :

hxxps://investors.dominos.co.uk/system/files/uploads/financialdocs/dominos-2017-preliminary-results-8-march-2018-transcript.pdf

" ...because the average Domino’s store is changing hands between franchisee at 65x weekly sales. "

i.e. an average Dominos in UK changes hands at 65x weekly sales. If we use the same model for DP Poland to give value to the stores in Poland the valuation for the Polish stores is :

System sales = £ 7.75m in 26 weeks = £300,000 per week
Corporate Stores are 35 and sub franchised ar 24 (as at 30 June)
Sales at corporate stores are say £200,000 per week as they are more mature.

On that basis the Polish corporate stores would be valued at, on a UK model which is highly profitable and has evidence of ACTUAL market valuations for stores changing hand, at a mere 200K x 65 = £13m.

Hardman values these same 35 stores at £70.5m (see page 20 of their report).

On that basis, and with the rationale set out as above I would contend that DP Poland is overvalued at the present 30p per share giving a £45m market cap.

[the ghost who walks] 18/9/2018 18:10

Lbo was the loss bigger than you expected? Worth assuming losses for the foreseeable future as the business is built so would recommend thinking in terms of the operating and value trends,

[the ghost who walks] 18/9/2018 17:50

also pleased to see them addressing questions clearly

[the ghost who walks] 18/9/2018 17:49

Significant value creation in 1h. Impressive

[adrunkenmarcus] 18/9/2018 08:48

I'm reading Hardman & Co:

hxxp://hardmanandco.com/docs/default-source/company-docs/dp-poland-plc-documents/18.09.18-fully-proven-model-rolls.pdf

[lbo] 18/9/2018 08:00

Indeed! More strong loss figures

[rock star] 18/9/2018 06:58

Spent £20m and still can’t make a profit. Pretty bad use of capital imo.

[the ghost who walks] 18/9/2018 06:09

Strong figures

[the ghost who walks] 12/8/2018 15:55

Have you sent your questions to the company?

[the ghost who walks] 12/8/2018 15:47

Lbo thanks for posting words from the prospectus. For your reference this also is on their website if you have time to post it.http://dppoland.com/2015/regulatory/h1-2018-trading-update/

[bigboyo] 12/8/2018 15:32

Interesting data, stuff that DP Poland does not mention in its updates (usual drivel such as about 15th successive growth in system sales or other such stuff which in reality is meaningless)

www.oecd.org/cfe/regional-policy/functional-urban-areas-all-poland.pdf

www.oecd.org/cfe/regional-policy/functional-urban-areas-all-united-kingdom.pdf

If we look at the functional urban areas for Poland and UK, we can see that UK is a lot more urbanised. Urban populations , deliveries , liklihood of ordering pizza, spending power etc all impact potential market size.

In addition, Poland is much bigger in sq miles than UK so its population density is much thinner (effects viability of delivery operation in terms of speed and costs for longer journeys). See maps in attached links.

Whilst "managment" spouts usual nonsense about Poland being able to support 300 Dominos (Uk has 1000+) , we have little by way of data to support this assertion made repeatedly by "management".

I hope that the next update with the interims provides a lot more data. I would like to see :

Number of pizzas ordered PLUS EDIDTA Plus LforL growth in 12 most mature stores (which I think are now open more than 5 years). Does not need to be per store but the average across the first 12 would give a good indication of what we can expect as newer openings bed down.

Concrete information about next openings, whether franchisee or corporate and why. Will the focus for forseeable future be the bigger urban areas where the brand is already known (and thus gives opportunity for more focused advertising) and maybe easier to open and get to breakeven faster ?

Absolute figure for net cash position and FORECAST figure for year-end netcash figure.

We need measurables to hold "management" to account for spending the companys cash and how it is allocating capital and the rationale behind it.

What we do not need is drivel, especially video podcasts which ask easy easy questions and make you wonder why bother !!

"Management" has 4 weeks before interims are published to get its presentations upto speed otherwise I suspect the decline in the share price will continue and may make DPP easy prey for a bigger global franchisee to take it away for cheap thus shafting the investors who have paid much more for their shares than the current share price

[lbo] 12/8/2018 13:31

The real market valuation comparisons speak for themselves. Also look at the Values applied to Joeys Pizza in Germany and Sprint Pizza in France also by Dominos themselves. Again no matter what spin people obviously linked with DPP would like to try make us believe. DPP is way overvalued

[lbo] 12/8/2018 12:55

Under the Master Franchise Agreement, DPP SA enjoys its exclusive rights for an initial period of 15 years, with an option (subject to certain conditions)Master Franchise AgreementThe success of the Group is highly dependent on the continuation of the MFA, which cannot be guaranteed if DPP SA commits breaches of its provisions which if remediable, are not cured within the period allowed under the MFA. Should the MFA be terminated, DPP SA's rights to operate the master franchise will cease, although existing store franchise agreements may continue depending upon whether Domino's Pizza Overseas Franchising B.V. exercises its right to acquire the assets of the stores.The MFA includes a condition that until such time as the number of stores opened in Poland exceeds 30 stores, the aggregate holdings of Ordinary Shares of Richard Worthington, Jerzy Jakubiak, Patrick Bodenham, Peter Shaw and Diggle Investments Limited shall not represent less than 25 per cent. of the issued Ordinary Shares. Whilst each such person has agreed in the Lock-In Agreement not to effect any disposal of Ordinary Shares so as to give rise to a breach of such condition, it cannot be certain that a disposal in breach of the Lock-In Agreement and MFA would not occur with the possibility that the MFA might be terminated as a result.10. Master Franchise AgreementAn agreement ("MFA") dated 25 June 2010 between Domino's Pizza Overseas Franchising B.V. ("DPOF"), an affiliate of DPIL (1) DPP SA, a wholly-owned subsidiary of the Company (2) and Richard Worthington (3) pursuant to which DPP SA has been granted the exclusive right to develop and operate and to sub- franchise the right to develop and operate Domino's Pizza delivery stores and an exclusive licence to use and sub-license the use of the Domino's Pizza system in Poland. A sum of US$350,000 was paid to DPOF on execution of the MFA in consideration of the rights granted by that agreement. The further principal terms of the MFA are summarised below.(a) Term. The term of the MFA is the period ending on the earlier of 15 years from the date upon which the MFA was executed and the date upon which all franchise agreements entered into pursuant to the MFA (whether in relation to stores operated by the Group or by sub-franchisees) have expired or been terminated. The initial 15 year term may be renewed for one additional 10 year term provided certain conditions are satisfied, including the requirement that DPP SA is not in default of the MFA or any other agreement between it and DPOF or its affiliates concerning the master franchise in Poland and has substantially complied with the provisions of such agreements. Such renewal will be required to be effected on the terms of DPOF's then current standard form master franchise agreement.(b) Termination by DPOF. DPOF may terminate the MFA earlier than the expiry of the above-mentioned term if the total number of stores opened in Poland at 31 December in each year is less than the development quota of stores specified in the MFA. It may also terminate the MFA in a number of other circumstances, including failure to comply in a timely fashion with DPOF's requirements for the submission of sales reports and other financial data or the payment when due of the royalty fee or advertising fee payable under the MFA. Termination may also be due to a failure by DPOF or its sub-franchisees to observe other provisions of the MFA dealing with the protection of the Domino's Pizza trademarks and/or the covenants by which DPP SA agrees to keep confidential information disclosed to it relating to the Domino's Pizza system and not to carry on or become interested in any similar business in Poland.(c) Other conditions. As a condition of the MFA, DPOF requires that until such time as the number of stores opened and operated in Poland exceeds 30 stores, the founding shareholders of the Company (being Richard Worthington, Jerzy Jakubiak, Patrick Bodenham, Peter Shaw and Diggle Investments Limited) must remain interested in a total number of Ordinary Shares representing not less than 25 per cent. of the issued and outstanding voting shares of the Company. If this condition is not met then DPOF will have the right to terminate the MFA. DPOF also required that Richard Worthington be a party to the MFA for the sole purpose of giving certain personal covenants and undertakings to DPOF, to the effect that during the term of the MFA or if shorter, the period until such time as he ceases to be a director, employee or consultant of DPP SA or its affiliates, he will not have any interest whether as an owner, investor, partner, licensee, lender, consultant, representative or agent in any business similar to that carried on by DPP SA and further that for the period of one year following the date of expiration or termination of the MFA for any reason other than DPOF's breach, or if ending earlier, for the period of one year following the date upon which he ceases to be a director, employee or consultant of DPP SA or its affiliates, he will not engage as an owner, investor, partner, licensee,lender, consultant, representative or agent in any such similar business activity in Poland, without the prior written consent of DPOF.(d) Effect of termination. Upon the expiration or termination of the MFA, DPP SA is required to cease immediately its operation of the master franchise although subject as set out below, each separate store franchise agreement relating to stores operated whether by DPP SA or its affiliates or its sub-franchisees shall remain in force for the remainder of the 10 year term for such agreement and subject to the terms of the store franchise agreement, the same may be renewed for a further 10 years. If, however, the reason for termination of the MFA is the breach of its terms by DPP SA, then all rights of DPP SA to enter into new franchise agreements in Poland will be suspended. Further, DPOF will then have the option to purchase at its discretion, all the assets associated with all or any of the stores owned or controlled by DPP SA or its affiliates and the rights under all subsisting sub- franchise agreements or all of the existing issued share capital of DPP SA, in which case the relative franchise agreement for each store owned or controlled by DPP SA will be terminated. If the MFA is terminated but such option is not exercised in such circumstances, then the royalty fee amount for the stores owned or controlled by DPP SA and its affiliates is to be increased to 5.5 per cent.(e) Store opening. The MFA does not of itself authorise DPP SA to open nor grant the right to any third party to open any store in Poland. In each case the approval of DPOF is required, such approval not to be unreasonably withheld delayed or conditioned. On the opening of each new store a non- refundable store opening fee of US$6,500 is payable to DPOF. In turn, in relation to sub-franchised stores, DPP SA can charge a store opening fee of up to US$15,000. Once a store is opened, a royalty fee is payable to DPOF at the rate of 4 per cent. of sales for stores opened and operated by DPP SA and its affiliates and 3.5 per cent. of sales for stores opened and operated by sub-franchisees. All such fees are payable to DPOF in U.S. Dollars.(f) Advertising fund. DPP SA is obliged to collect from its sub-franchises and itself to pay an advertising fee of 4 per cent. of weekly sales into a separate advertising fund in Poland. In addition, for each new store opened DPP SA will be required produce its advertising and promotion plans for approval by DPOF and will be required to expend the local currency equivalent of US$3,000 in opening advertising and promotion.(g) Designated representative. DPP SA is obliged to appoint (subject to the approval of DPOF) an individual to be a designated representative required to devote his full time and best endeavours to the development, management and supervision of the stores in Poland. DPP SA's first designated representative will be Jerzy Jakubiak.(h) Store franchise agreements. DPP SA is required to comply with the MFA and the provisions of each store franchise agreement relating to stores opened and operated by DPP SA. In addition it will be required to use its best endeavours to ensure that each of its sub-franchisees complies with their store franchise agreements with DPP SA. Each store franchise agreement with sub-franchisees must be in a form approved in writing by DPOF (such approval not to be unreasonably withheld, delayed or conditioned). DPOF is obliged to diligently recruit suitable sub-franchisees in Poland.(i) Training. DPP SA is obliged to provide adequate training and support for managers and employees of stores owned or operated by DPP SA.(j) Names and marks. DPP SA is granted the right to use and license the use of the Domino's trade marks in Poland subject to the terms of the MFA. DPP SA is required to notify DPOF immediately of any infringement or challenge to its use of any of the Domino's Pizza marks in Poland or any claim by any person of any rights in any of the Domino's Pizza marks or any suspected passing-off or unfair competition involving the Domino's Pizza marks or the Domino's Pizza system. DPOF has undertaken in turn, to indemnify DPP SA from and against and to reimburse it and its affiliates for all damages for which they may be held liable in any proceeding, action or claim arising out of the use of any Domino's Pizza mark in compliance with the MFA and for all costs reasonably incurred by DPP SA or its affiliates in the defence of any such claim brought against it. In turn, DPP SA has also agreed to indemnify DPOF from and against and to reimburse to DPOF in any proceeding, action or claim arising out of the use of any Domino's Pizza mark by DPP SA or its affiliates otherwise than in accordance with the MFA and applicable store franchise agreement.(k) DPP SA covenants. DPP SA has covenanted with DPOF that, during the term of the MFA, it will not have any interest whether as an owner, investor, partner, licensee, lender, consultant, representative or agent in any other business similar to that carried on pursuant to the MFA and further that for the period of one year following the date of expiration or termination of the MFA for any reason other thanDPOF's breach, it will not engage as an owner, investor, partner, licensee, lender, consultant, representative or agent in any such similar business activity in Poland without the prior written consent of DPOF. Such restriction is not, however, to apply to any store franchise or sub-franchise agreement which remains outstanding following termination of the MFA. These covenants and undertakings are also given by DPP SA on the basis that it is obliged to procure (so far as it is reasonably able) compliance with the same by its affiliates.(l) Commissary. Whilst DPOF reserves the right to supply food products and ingredients, beverage products, supplies and materials to all the Domino's Pizza stores in Poland, DPOF has irrevocably agreed in the MFA to grant to DPP SA (under a knowledge and technical assistance agreement in the agreed form), the sole and exclusive right for DPP SA to establish a commissary or commissaries for the purpose of supplying food products and ingredients, beverage products and other supplies and materials to all Domino's Pizza stores in Poland. The right to operate such commissary or commissaries will continue until the expiration or termination of the MFA. In operating a commissary, DPP SA will be obliged to ensure that it only uses suppliers who have been designated by DPOF or who have been approved by DPOF.(m) Assignment. DPOF has reserved the right to assign its interest in the MFA at any time. In the event that it does so it will use its best efforts to ensure the assignee agrees to observe and perform all the terms and conditions on the part of DPOF contained in the MFA, but it shall not be a condition of such assignment that the assignee so agrees. Further DPP SA is obliged nonetheless on any such assignment to release DPOF from all future liability under the MFA. DPP SA cannot, however assign its interest in the MFA without the prior written consent of DPOF.(n) Governing law and disputes. The MFA is governed by laws of the State of Michigan except the Michigan Franchise Investment Law is not to apply unless its jurisdictional elements are otherwise met. All disputes, controversies or claims between DPOF and DPP SA arising out of the MFA are to be submitted for arbitration to be administered by the American Arbitration Association. The place of arbitration would be Ann Arbor, Michigan.

[the ghost who walks] 12/8/2018 10:11

LBO Where did I say in 17 years it would be worth zero? I think the corporate stores are still owned by Dpp but would need to rebrand, 17 years from now, assuming no extension at that point.On value, I would, until being educated by you, make projections of cash flows under different assumptions and value each of those and see how that compares to current market cap.But following your views I'm going to spend the rest of the day going through the market looking for stocks not trading on 10x and develop a revolutionary trading pattern based on "premium and discount" to that. Don't tell anyone as don't want it copied too quickly!