After a fourth-quarter result that disappointed the market two weeks ago, Yowie Group Ltd (ASX: YOW) released a non-market sensitive update yesterday in the form of a ‘Canaccord Growth Conference Presentation’.

It’s important to remain objective when reading these types of presentations, as they can be a little hype-y, focussing exclusively on the upside.

Bearing that in mind, Yowie still looks like a small-cap with plenty of upside, and here’s why:

  • Now present in more than 40,000 stores (up from ~30,000 a few months ago)
  • This is just ~10% of addressable retailers
  • #1 selling immediate chocolate item in US and already a top 5/top 10 performer in a variety of sales categories
  • Recent hiring of CEO and COO with ample confectionary experience
  • Cashed up with US$32 million in the bank
  • Brand-building and book + webisode and interactive website development
  • Licensing and contract manufacturer for other chocolate brands
  • Expectats to double revenue and hit profit break-even point in 2017 financial year
  • Record number of sales orders already achieved in July – strong start to first quarter (“Q1”) even though relatively weak time of year for chocolate sales
  • 98% of its receivables are ‘current’ accounts, to be paid within 30 days (fairly small lag-time between manufacturing and cash payments received from retailers)

What now for Yowie Group

Even ignoring the presentation’s guff about worldwide expansion, movies, and multi-billion dollar markets, there’s enough above to present a compelling investment case for Yowie. Yowie intends to launch its publishing arm in 2017 and will also try its hand at introducing collectible Yowies plus commence its first major advertising campaigns – success to date has been achieved largely without heavy media spending.

There are also plans to optimise manufacturing and the sales process as well as get added to permanent store planograms which could add value to existing operations. There will be an increase in working capital spending next quarter in order to ensure enough inventory for customer requirements.

One thing investors may have been guilty of in the past – myself included – is reading too much into Yowie quarterly reports, and thankfully as the company grows timing differences and such will become less noticeable.

Yowie is not a risk-free investment – I expect shares to remain volatile going forward and there are the usual questions about whether new ventures (books, games, etc) will bear fruit or be a money sink. However, the company is continuing to execute on its strategy and with its success so far I find myself optimistic about the future.

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Motley Fool contributor Sean O'Neill owns shares of Yowie Group Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.