RBC hails growth potential at Domino's Pizza Group

16th Jul 2024 08:05

(Sharecast News) - RBC Capital Markets has started coverage of UK-listed Domino's Pizza Group with an 'outperform' rating, hailing the appointment of a new chief executive along with the company's numerous opportunities to drive order growth.

RBC said that Domino's Pizza Group could be a "different business in two-three years' time", and that the current valuation doesn't reflect the potential of its core operations.

The UK-based master franchise of the global takeaway chain last week appointed Andrew Rennie as its new CEO, the former COO of Domino's Pizza Enterprises.

Most recently, Rennie was the CEO of Australia and New Zealand "where under his watch, growth shifted from low single-digit LFL to double-digit, with stores growing from 550 to 800 in what was perceived to be a mature market, analagous to some perceptions of the UK", RBC said.

The broker also highlighted the company's plans to drive order growth, saying that increased app and marketing personalisation, along with the proposed loyalty scheme, will "boost order frequency and re-invigorate the dormant customers that app data reveals".

Elsewhere, Domino's store openings plan for UK and Ireland will gather pace in the medium term, with the company targeting 1,600 stores by 2028.

There's also the potential for the launch of a second brand - with plans recently shared by Rennie - which would be "backed by some of the UK's most successful franchisee entrepreneurs and facilitated by the scale of the plc", RBC said.

The broker has a 400p target price for the stock, which was up 0.2% at 322.2p by 0900 BST.