LONDON, UK / ACCESSWIRE / September 22, 2017 / After a year of internal and external challenges, we believe Yowie (OTC PINK: YWRPY) (OTC PINK: YWGRF) has built a strong and reliable operational base and business plan that will support continued sales growth and a move to profitability by the end of fiscal 2018. With US$1.25/ADR in cash, no debt, and modest working investment needs, we see Yowie shares as compelling value for long-term growth investors.
Yowie's share price dropped nearly 50% since our update note published on 17 May 2017. Investors appear overly focused on the quarterly sales trajectory, which for start-up companies can be very volatile driven by one-off aberrations such as initial order channel fill, supply/distribution chain disruptions, and inventory management at the customer level. Yowie has grown sales from US$2.4m at the end of FY15 to nearly US$20m in two years, with no brand recognition and limited promotion in the US. The company has healthy gross margins of c 50%, administrative expenses that will benefit from increased economies of scale and US$1.25 cash supporting its US$1.60/ADR price. Our target value of US$3.70/ADR is based on a 10% WACC, a sales CAGR of 36% through FY20, tapering to 2%, and an undemanding EBIT margin of 8%.
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