Could this be the next penny share pizza phenomenon?

Poland's DP Pizza is valued at £11m, despite not having a single pizza outlet up and running. But Tom Bulford has discovered another penny share which already has 11 stores and is valued at just £3m.

Here's an interesting stat for you: less than 25% of those people who order meals for home delivery in Poland are happy with what they get. So why don't they don an apron, find their oven's 'on' switch and cook something for themselves?

Of course, it's because these days, people don't have the time to cook. Either that or they don't have the inclination. Or they simply do not know how.

About 18 months ago, a shocking television programme, Jamie's Ministry of Food, was aired. In it, Jamie Oliver attempted to teach the people of Rotherham - reputed to be the 'fattest' town in Britain - how to cook.

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It was shocking because it revealed that many of them simply didn't know how to cook. Family break-up meant that they had not learnt from mum, and a lack of appropriate education meant they had no idea where to start.

But Rotherham was just the thin end of the wedge. Even where the knowledge exists, the opportunity frequently does not. Many of today's single working mums are too exhausted to do more than visit the takeaway on the way home.

It is a depressing picture of the way we live. But it is great news for the fast food business in general and for one company in particular: Domino's Pizza.

Why this AIM debutant could be the next penny share fast-food phenomenon

I am always on the look-out for a food chain that can expand and multiply. Many try, but few last the course. Those that do, such as Garfunkel's and Costa Coffee, make good money for their owners - especially if, like McDonalds and Starbucks, they cross national boundaries.

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These global brands are few and far between, but Domino's is one of the few that has successfully wooed hungry customers all over the world.

The other week, investors got another chance to invest in the Domino's phenomenon when shares of DP Pizza (ticker: DPP) started trading on AIM.

DP Pizza has the Domino's Pizza master franchise for Poland. And, like a good pizza, it has the right ingredients for success.

Poland has one of Europe's most successful economies. It was the only one of 27 EU members to have escaped a recession in 2009. The economy is now growing at about 3% per year. It is a country with 38 million hungry mouths to feed and a substantial urban population. These people are all potentially within easy reach of the pizza delivery bike.

DP plans to open 27 stores in and around Warsaw, before going outside the capital and moving towards a target of 65 stores by 2014. As it does so, it will add to Domino's already considerable presence.

Founded in 1960 by Tom Monaghan, Domino's now stretches to 9,000 pizza stores the world over. Last year these churned out over 400 million pizzas, generating revenues of $5.6bn.

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This has got to be one of the most successful franchise operations of all time. It has made Monaghan one of the richest men in America. And it's made good money for investors, too.

In fact, one of its spin-offs, the AIM-listed Domino's Pizza UK & Ireland (ticker: DOM), is one of the great penny share success stories of the past decade. A £500 investment in that share tenyears ago would be worth £11,625 today - that's 23 times your money!

To see that staggering growth in picture form, take a look at this chart...


The secret to Domino's Pizza's runaway success

The foundation for this extraordinary success is the business model. Domino's trick is to be a very well known high-street name without actually being on the high street.

Because it is not a sit-down restaurant, it occupies back-street - but nonetheless visible - locations. And of course it does not need space for tables and chairs. Pizza dough is made elsewhere and delivered. And the manager of each store has plenty of training in the Domino's way, as well as a large instruction manual.

Of course, you'll have different pizza toppings to cater for local tastes. And no doubt a selection of Polish cheeses and sausages will find their way onto Warsaw's pizzas. But other than that, the pizza business is the same the world over. And Domino's has won a reputation for quality both of product and service.

So DP Pizza is an interesting new proposition. And since executive chairman Richard Worthington has already impressed the City through the creation of the Eastern European coffee shop chain coffeeheaven, it seems certain to get good support.

Could this be the next great penny share pizza success story?

But here is the punch line. The US, UK and now this Polish manifestation of the Domino's phenomenon are not the only opportunities for investors looking for some real dough. There is another penny share opportunity which, although risky, could be rewarding for investors.

First, consider the fact that Poland's DP Pizza is already valued at £11m. That's despite not having a single pizza outlet up and running.

Meanwhile, this other penny share I've discovered already has 11 stores. But it's valued at just £3m. And that's despite a very positive recent trading statement.

Readers of my Red Hot Penny Shares newsletter already know the name of this company. I believe it could multiply in value over the next few years.

If you'd like to read the recommendation I made for this company in my latest issue, why not give Red Hot Penny Shares a no-obligation trial? To remind you, Red Hot Penny Shares is a full advisory newsletter, where I give readers specific buy and sell tips on penny shares.

I can send you the issue where I reveal this pizza share right away. And you can get the next three issues too to see if you like the service. This will be a great chance for you to see why so many Penny Sleuth readers have upgraded to Red Hot Penny Shares.

If you like it as much as I hope you will, consider staying on for a full year. If not, no problem. You can still keep what I send you and I thank you for at least trying it out.

To find out more about my Red Hot Penny Shares newsletter, just give customer services a ring on 0207 633 3601 and quote: RED HOT PIZZA. If you're keen to try out Red Hot Penny Shares, one of my helpful colleagues will send you the 'pizza' issue.

Red Hot penny Shares is a regulated product issued by MoneyWeek Ltd. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Penny shares can be relatively illiquid and hard to trade. There can be a large bid/offer spread so if you need to sell soon after you've bought, you might get less back than you paid. This can make them riskier than other investments. Please seek advice if necessary. 0207 633 3780.

This article was first published in Tom Bulford's twice-weekly small-cap investment email The Penny Sleuth.

Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.

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