DOL DOL-ing Out Strong Earnings; Raising Forecasts and Target

admin — Tue, 15 Dec 2009 21:37:00 +0000

RBC CM Outperform, Average Risk, Price Target: $25.00 (was $23.00)
Dollarama reported strong and better than expected Q3 results yesterday. EPS before non-recurring and adjusted for go-forward shares outstanding of 75.0 million was $0.31, better than forecast of $0.21, which assumed limited FX gains and no existing interest accretion on the existing preferred interests. Third quarter earnings were driven by higher than expected gross margin of 35.5% vs. estimates of 34%, which was in line with the long-term target as articulated by management at the time of the IPO. DOL reported sales of $312.8 million (+14.8%), consistent with forecast. Comps of +7.3% were in line with RBC CM’s +7.5% forecast and consistent with first half performance. Looking ahead, RBC CM continues to forecast comps of 7.2% for F2010 and 5% for F2011, settling back to the long-term sustained rate of 3% thereafter. Gross margins of 35.5% (+137 bps) were well ahead of forecast of 34.0% and driven by better merchandising margins and lower freight costs.

DOL four reasons RBC expects DOL to outperform

admin — Thu, 19 Nov 2009 22:14:35 +0000

RBC CM is initiating coverage of Dollarama with Outperform, Average Risk Rating and $23 target. RBC CM expects DOL to outperform its peers for four reasons: 1. DOL offers above-average growth potential, driven by its industry-leading position, profitability metrics and square footage growth potential; 2. DOL’s superior merchandising skill should enable it to profitably grow its market share both geographically and on a category basis to drive strong, consistent growth; 3. DOL’s solid free cash flow generation should allow it to both de-lever its balance sheet and expand its square footage at an estimated 7% per year; and 4. DOL offers a good mix of defensive and cyclical business that should respond well in a recovery, or minimize downside risk in the event of a more prolonged downturn. RBC CM believes Dollarama’s premium valuation is warranted based on its sustainable, industry-leading profitability, peer group-leading square footage growth, solid free cash flow generation and strong earnings growth. Catalysts include better-than-expected performance, a market shift to defensive names, and an increased float.

TSX Commentary » Dollarama Inc.

DOL DOL-ing Out Strong Earnings; Raising Forecasts and Target

DOL four reasons RBC expects DOL to outperform