Domino's Pizza Enterprises Fingers firmly on the PULSE Event

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1 AUSTRALIA DMP AU Price (at CLOSE#, 17 Feb 2016) Neutral A$55.52 Valuation A$ DCF (WACC 8.3%, beta 1.2, ERP 5.0%, RFR 3.8%, TGR 3.0%) 12-month target A$ month TSR % Volatility Index High GICS sector Consumer Services Market cap A$m 4, day avg turnover A$m 19.8 Number shares on issue m Investment fundamentals Year end 30 Jun 2015A 2016E 2017E 2018E Revenue m , ,308.8 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x DMP AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, February 2016 (all figures in AUD unless noted) 18 February 2016 Macquarie Securities (Australia) Limited Fingers firmly on the PULSE Event DMP reported 1H16 underlying NPAT of $45.6m (+56.7% YoY), +16.3% above our $39.2m estimate. FY16 guidance for underlying NPAT and EBITDA growth was upgraded to +35% from +30%. Impact FY16 EBITDA/NPAT growth guidance upgraded to +35% the third upgrade in six months. DMP continues to perform above expectations, with an elevated store rollout in 1H16 and strong same store sales (SSS) across ANZ and Europe driving performance. FY16 EBITDA/NPAT guidance of +20% was provided in Aug 15 and subsequently upgraded in Oct 15, Dec 15 and Feb 16 to +25%, +30% and +35%, respectively. The key assumptions underpinning the latest guidance upgrade include SSS growth in ANZ of %, Europe +8 10% and Japan -2 0% and stores to be opened. Growth implied to slow in 2H16. Based on FY16E EBITDA growth of +35%, 2H16 EBITDA is implied to grow at ~30% and is inclusive of the Sprint (France) and Joeys (Germany) acquisitions, which were finalised in January and February, respectively. Excluding the impact of acquisitions, organic 2H16 EBITDA growth is implied to be ~27.5%. The cycling of strong comparable periods across Europe and ANZ in 2H15, coupled with the period-end timing difference (1H16 ending 3 Jan vs 1H15 ending 28 Dec) having a material impact, particularly in Japan, were provided as reasons for the slowdown in growth in 2H16. Management appears to have a conservative view of 2H16, which highlights the potential for further guidance upgrades. Tech innovations providing plenty of upside. The impressive tech pipeline at DMP continues to highlight upside potential for sales and earnings growth. The rollout of Pulse in France in July is expected to contribute materially to sales growth. Further, the rollout of DMP s OneDigital Platform across Germany and Japan in 2016 will enable the highly successful tech innovations currently being used in ANZ (eg, driver tracker) to be rolled out efficiently on a global basis at a lower cost. Further, having all countries on the OneDigital Platform will enable each country to share the costs of tech development, providing some relief for the ANZ business, which management expects to achieve ~38% EBITDA margins within the next three years (33% in FY15). Earnings and target price revision EPS: FY16E +6.6%; FY17E +15.7%; FY18E +17.0%. PT increased 21.1% to $ Price catalyst 12-month price target: A$60.64 based on a DCF methodology. Catalyst: FY16 result. Action and recommendation Neutral. DMP s earnings momentum is clear, in our view, as the market processes the third guidance upgrade in six months. The next earnings revision is likely to be up, given the slowdown in 2H16 NPAT growth implied by guidance, despite the contribution from acquisitions. We forecast 2H16 NPAT growth of 22% and FY16 growth of 38%, ahead of guidance (35%). In our view, the market is largely pricing in further upgrades to guidance. We transfer coverage of DMP from Jennifer Kruk to Elijah Mayr. Please refer to page 7 for important disclosures and analyst certification, or on our website

2 Fig 1 DMP 1H16 results the good, the not so good and the interesting The good The not so good The interesting Upgraded FY16 NPAT guidance again. This is the third upgrade in six months: Cash flow growth well behind growth seen through P&L. Operating 2H16 slowdown: FY16 guidance (35% NPAT growth) implies a material slowdown 11 August 2015: 20% (initial) cash flow fell 2.1%, and free cash flow in NPAT growth in 2H16 (+17%) vs 1H16 4 November 2015: 25% declined from $15.6m in 1H15 to (+57%). In response to questions on $12.7m in 1H16, driven by higher guidance, management highlighted the 16 December 2015: 30% capex. Given the organic growth strong SSS they will be cycling from 2H15 17 February 2016: 35% trajectory and investment in and that there is still five months to go in While acquisitions have partly driven guidance higher, the underlying business continues to exceed expectations. With current guidance implying 2H16 NPAT growth of just 17%, there may be a fourth guidance upgrade to come. Key assumptions underpinning this guidance: acquisitions. Japan SSS -1.2%, impacted by slightly softer Christmas trade and mix-shift toward pick-up (46% of network sales vs 42% last year). Note pick-up sales have a smaller average order size than the period, indicating an element of conservatism in their forecast. Franking drops below 100% for the first time: The contribution from offshore earnings have now reached a point at which DMP can no longer fully frank delivery. dividends, reducing franking on 1H16 DPS Same store sales (SSS) growth: ANZ +11 to 70%. Given the very high multiple and 13% (increased ~2%); Europe +8 10% resulting low dividend yield (~1.5%), this is (increased ~2%); Japan -2 0% (decreased not expected to be material to the share ~2.0%). price. New store openings: vs minute delivery: DMP launched a trial previously. store in QLD that promises delivery of EBITDA/NPAT growth: +35% vs. +30% previously. pizza within 10 minutes from the time it is ordered. Across the network, DMP expects Net capex: $ m (unchanged). to deliver pizzas in minutes 1H16 ahead of expectations: 1H16 underlying NPAT of $45.6m (+56.7% YoY) is +16.3% above the Macquarie forecast. (currently a 15- or 20-minute guarantee) and have orders ready for pickup in 4 5 minutes. This will require investment from franchisees but also the potential to SSS growth increases to 13.8% in Aust/NZ, materially increase volumes and driven by the GPS Driver Tracker (GPSDT) and profitability. $5 cheaper every day campaign. Management highlighted the composition of growth was largely driven by customer numbers but did larger order sizes given the mix-shift to delivery post GPSDT. Domino s demographics are evolving: The shift in marketing and product range is growing the customer base, as DMP now appeals more to women rather than the European organic store roll-out expected to traditional DMP demographic of 16- to 24- reach record of 60 in FY16 (17 in 1H16). year-old males. As DMP continues to European margin growth expected to continue post acquisitions, having increased from 8.3% in 1H15 to 13.7% in 1H16 and forecast to be increase the focus on food quality and freshness, this customer diversity is expected to continue to increase. between 14% and 15% in 2H16. Management Mobile now accounts for 60% of online stated they are a year ahead of schedule in their sales, with SMS ordering (Pizza emoji) goal to reach 20% EBIT margins in Europe. rolled out. Online sales growth (+23.9%) in Aust/NZ continues to outpace SSS (+13.8%) and is in line with overall sales growth (+23.9%). Online sales growth in Europe remains elevated (France: 33.0%, Netherlands: 31.1%, Belgium: 55.4%). Source: Macquarie Research, February February

3 Macquarie Wealth Management Result overview Fig 2 1H16 result overview vs MacqE and pcp; DMP exceeds expectations and upgrades guidance A$m; June y/e vs. pcp Macq E vs. Macq E Network sales % % Revenue % % EBITDA % % Depreciation % % EBIT % % Net interest expense % % Pre-Tax Profit % % Tax Expense % % Net Profit % % Outside equity interests % % Net Abnormals/Extra Reported Earnings % % Adjusted Earnings % % Gross Cashflow % % EPS (adj/diluted) % % DPS % % EBITDA margin 17.4% 19.3% 1.9% 17.8% 1.5% EBIT margin 13.6% 15.6% 2.0% 14.1% 1.5% Source: Company data, Macquarie Research, February 2016 Fig 3 OCF conversion to EBIDA (ungeared, pre-tax); declined in 1H16 as a result a negative impact from changes in working capital during the half, FY16 expected to be >100% 160.0% 140.0% 120.0% 100.0% 80.0% 115.2% 102.1% 84.4% 106.2% 72.6% 97.7% 88.1% 133.7% 109.9% 91.5% 85.5% 113.7% 105.4%101.7%96.4% 105.0% 60.0% 40.0% 20.0% 0.0% Source: Macquarie Research, February February

4 1H09(a) 1H09(a) 1H09(a) 1H09(a) 1H09(a) Macquarie Wealth Management Divisional breakdown overview Fig 4 European acquisitions forecast to increase contribution to network sales... Network sales (AUD) 1,600 JAPAN GERMANY 1,400 EUROPE AUSTRALIA 1,200 1, Fig 5... as store growth targets are increased ~2,500 across Europe by 2025 and 4,250 globally Store count (#) 2,500 2,000 1,500 1, JAPAN EUROPE GERMANY AUSTRALIA Source: Company data, Macquarie Research, February 2016 Source: Company data, Macquarie Research, February 2016 Fig 6 ANZ: SSS growth forecast to moderate from historically high levels... Sales growth (%) 30% 25% 20% 15% 10% 5% 0% -5% Same-Store-Sales New Space Growth Total Network Sales Growth Fig 7... with EBITDA margins guided to expand to ~38% over the next three years EBITDA ($m) EBITDA margin (%) 60 Total EBITDA 40.0% Total EBITDA margin % 30.0% % % % 10.0% % 0 0.0% Source: Company data, Macquarie Research, February 2016 Source: Company data, Macquarie Research, February 2016 Fig 8 Europe (ex Germany): Acquisition of Sprint to significantly impact growth in 2H16E and 1H17E Fig 9 Japan: Total sales growth driven by the elevated store roll-out across Japan Sales growth (%) 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% Same-Store-Sales New Space Growth Network Sales Growth EUR Sales growth (%) 80% 60% 40% 20% 0% -20% -40% Same-Store-Sales New Space Growth Network Sales Growth JPY Source: Company data, Macquarie Research, February 2016 Source: Company data, Macquarie Research, February February

5 Domino's Pizza (DMP:$55.52) 18-Feb-16 Interim results 1H/15A 2H15A 1H/16A 2H/16E Profit & Loss 2015A 2016E 2017E 2018E Revenue Revenue $m , ,308.8 EBITDA $m EBITDA $m Depreciation $m Depreciation $m Amortisation of goodwill $m Amortisation of goodwill $m EBIT $m EBIT $m Net Interest expense $m Net interest expense $m Pre-Tax Profit $m Pre-Tax Profit $m Tax Expense $m Tax Expense $m Net Profit $m Net Profit $m Outside equity interests $m Outside equity interests $m Net Abn/Extra $m Net Abnormals/Extra. $m Reported Earnings $m Reported Earnings $m Adjusted Earnings $m Adjusted Earnings $m Gross Cashflow $m Gross Cashflow $m EPS (Adj/dil) c EPS (adj/diluted) c EPS growth % EPS growth % CFPS c PE (adj) x CFPS Growth % CFPS c EBITDA/Sales % CFPS Growth % EBIT/Sales % PGCFPS x Earnings Split % DPS c Revenue Growth % Yield % EBIT Growth % Franking % Profit and Loss ratios 2015A 2016E 2017E 2018E Cashflow Analysis 2015A 2016E 2017E 2018E Revenue Growth % EBIT Growth % Pre-tax Profit $m EBITDA/Sales % Depreciation & Amortisation $m EBIT/Sales % Tax Paid $m Effective tax rate % Gross cashflow $m Payout ratio % Changes in working capital $m EV/EBITA x Other $m EV/EBITDA x Operating Cashflow $m EV/Sales x Acquisitions $m Capex - Plant & Equip. $m Balance sheet ratios Asset Sales $m ROE % Other $m ROA % Investing cashflow $m ROFE % Dividend (ordinary) $m Net Debt $m Equity raised $m Net Debt/Equity % Other $m Interest Cover x Financing cashflow $m Price/NTA x NTA per share $ Net Change in cash/debt $m EFPOWA m Historical performance 2013A 2014A 2015A Balance Sheet 2015A 2016E 2017E 2018E Cash $m Revenue $m Receivables $m EBITDA $m Inventories $m Depreciation/Amortisation $m Investments $m EBIT $m Property, plant & equipment $m Net interest expense $m Intangibles $m Pre-Tax Profit $m Other Assets $m Tax Expense $m Total Assets $m Net Profit $m Payables $m Net Abn/Extra $m Short Term Debt $m Long Term Debt $m EPS (adj/dil) c Other Liabilities $m EPS growth % Total Liabilities $m Ordinary DPS c Shareholders Funds $m EBITDA/Sales % Minority Interests $m EBIT/Sales % Total Shareholders Equity $m ROE % ROFE % Total Funds employed $m EFPOWA m Source: Company data, Macquarie Research, February February

6 Fundamentals Macquarie Wealth Management Macquarie Quant View The quant model currently holds a strong positive view on Domino's Pizza Enterprises. The strongest style exposure is Price Momentum, indicating this stock has had strong medium to long term returns which often persist into the future. The weakest style exposure is Valuations, indicating this stock is over-priced in the market relative to its peers. 13/409 Global rank in Consumer Services % of BUY recommendations 25% (3/12) Number of Price Target downgrades 0 Number of Price Target upgrades 3 Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Consumer Services) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. Domino's Pizza Enterprise 1.8 Technology One 1.4 REA Group 1.4 Carsales.com 0.8 The Star Entertainment Gr 0.7 Nine Entertainment Co. Ho 0.2 TABCorp Holdings 0.2 Kathmandu 0.1 Ardent Leisure Group Domino's Pizza Enterprise Technology One REA Group Carsales.com The Star Entertainment Gr Nine Entertainment Co. Ho TABCorp Holdings Kathmandu Ardent Leisure Group -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Domino's Pizza Enterprise Technology One REA Group Carsales.com The Star Entertainment Gr Nine Entertainment Co. Ho TABCorp Holdings Kathmandu Ardent Leisure Group Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. Domino's Pizza Enterprise Technology One REA Group Carsales.com The Star Entertainment Gr Nine Entertainment Co. Ho TABCorp Holdings Kathmandu Ardent Leisure Group -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Price Upside Price to Sales LTM PEG Ratio Inverted Turnover (USD) 250 Day DPS Revisions 3 Month Momentum 6 Month 3m Recom. Revisions Momentum 3 Month -25% -18% -20% -22% Negatives Positives 12% 12% 23% 20% -30% -20% -10% 0% 10% 20% 30% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score Percentile relative to sector(/409) Percentile relative to market(/396) Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 18 February

7 Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down % in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 December 2015 AU/NZ Asia RSA USA CA EUR Outperform 50.68% 61.04% 53.16% 47.90% 65.22% 43.59% (for global coverage by Macquarie, 5.33% of stocks followed are investment banking clients) Neutral 31.51% 24.66% 34.18% 47.70% 29.71% 34.62% (for global coverage by Macquarie, 5.02% of stocks followed are investment banking clients) Underperform 17.81% 14.30% 12.66% 4.39% 5.07% 21.79% (for global coverage by Macquarie, 3.78% of stocks followed are investment banking clients) DMP AU vs ASX 100, & rec history (all figures in AUD currency unless noted) Note: Recommendation timeline if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, February month target price methodology DMP AU: A$60.64 based on a DCF methodology Company-specific disclosures: Important disclosure information regarding the subject companies covered in this report is available at Date Stock Code (BBG code) Recommendation Target Price 16-Dec-2015 DMP AU Neutral A$ Nov-2015 DMP AU Neutral A$ Oct-2015 DMP AU Neutral A$ Aug-2015 DMP AU Neutral A$ Mar-2015 DMP AU Neutral A$ Feb-2015 DMP AU Neutral A$ Oct-2014 DMP AU Neutral A$ Aug-2014 DMP AU Neutral A$ Jul-2014 DMP AU Neutral A$ Feb-2014 DMP AU Neutral A$ Aug-2013 DMP AU Neutral A$11.71 Target price risk disclosures: DMP AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. 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