The bargain hunter’s guide to Yowie Group Ltd shares

Yowie Group Ltd (ASX:YOW) announced yesterday that it has signed a three-year licensing agreement for YO-KAI WATCH, an Intellectual Property (IP) licensed toy owned by LEVEL-5 abby Inc that is reportedly quite successful in Japan. This follows on from several recent licensing agreements such as Angry Birds, and SpacePOP.

Yowie will gain the right to manufacture and sell a chocolate candy item containing a surprise collectable toy, and a ‘Chocobar’ that is reminiscent of the main YO-KAI WATCH character’s favourite candy.

After a long time researching YO-KAI WATCH I frankly have little idea of the appeal or likely longevity of the brand. Yowie’s announcement provided a number of stats on its popularity – it looks popular – and the ‘breadth’ of brand merchandise related to it includes Disney channel shows, Nintendo games, Android iOS apps, and so on. The whole thing is reminiscent of some brands from my childhood like Pokemon, Digimon, Yu-Gi-Oh.

Beyond that, investors should do their own research to decide if the licensing arrangement is a winner – or perhaps ask your children!

Yowie’s Corporate Plan

It seems to me that management is looking to use a number of licensing agreements to ramp up chocolate manufacturing and boost cash flows and revenues. I assume that as these increase, a growing portion of the funds will be used on Yowie brand building across television shows, movies, books, etc.

This seems a sensible approach as it effectively uses other brands’ IP to boost Yowie’s revenues, which it can use in turn to grow its own business. However, I’m cautious that as more brands enter the children’s chocolate market, they will be competing with the Yowie brand.

The market is big enough for multiple brands, but if Yowie’s main job becomes chocolate producer for other brands, it opens itself up to competition. It’s too early to say whether this is an item of concern, but investors should watch to see how the situation evolves. In the meantime I’d consider this announcement to be generally positive.

Is Yowie the best place for your money right now? 

Our resident dividend expert thinks not! That's why it's not his Top Dividend Share for 2016. Not only are these shares dirt cheap, the company is growing and trades on a 5.6% fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card or payment required!

What are you waiting for?

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.