THE YIELD: Tony Nash On The E-Commerce ‘Bullet-Train’

Natasha Sholl By Natasha Sholl | 23 Jun 2021

As we head towards the end of FY21, who are the ASX winners and which ASX-listed companies aren’t meeting expectations?

Last week, Power Retail broke news of Cettire’s trading halt after its share price dropped 21.43%. Cettire responded to questions put to it by ASX, stating that the dramatic plunge was a response to an AFR article (that reported fund managers who bought into Cettire’s $65 million initial public offering were worried about the company’s ‘longer-term prospects’). After rejecting these claims and updating its sales revenue estimate to $85 million, the share price recovered slightly, closing out at $2.10 the day after the trading pause. At 10.2% up over seven days, it remains to be seen whether this growth will continue. The sales revenue is clearly there, but with questions raised over its business model and ability to scale over time in a changing market, whether it can maintain its position is uncertain.

Speaking of recoveries, Adore Beauty seems to have found its way out of its May slump, when shares dropped to $3.37 from over $5 the month beforehand. Up 18.6% over 30 days, Adore closed out at $4.40 on Monday and has not dropped below the $4 mark for the entire month. It seems that the May dip, potentially triggered by concerns related to Active Customers, may have self-corrected, with investors showing more confidence moving forward.

Similarly, Kogan looks like it has followed a similar path to Adore, stabilising after a more volatile few months. Sliding to $8.91 in May (a few days after Adore’s dip), Kogan shares closed out at $11.05 on Monday, a 24% rise over 30 days.

As we’ve reported in the last few weeks, Booktopia is showing none of the reactivity we’ve seen in some ASX-listed e-commerce companies.  Also unlike some e-comm companies (Kogan, Adore, etc. al), Booktopia’s listing price was fairly conservative. “Booktopia was in a position going into the IPO that the founders were the major shareholders. Our first capital raise occurred in the beginning of 2020 where we raised $8m for a minority share position. By the end of the year we listed on the ASX. These circumstances meant that we did not need to set a listing price at top dollar,” explains Tony Nash, CEO & Founder, Booktopia. “The IPO share price was set with some upside left in it based on supply and demand for the shares from the institutional and retail markets.”

Booktopia’s December Prospectus estimated revenue of $204.5m and $9.4m EBITDA. In February it updated the market that it was on track for $217.6m in revenue and $12.9m EBITDA, which impacted its share price. It hasn’t made any upgrades since February other than now stating that “the year has gone very well and we are on track to deliver those results.”

Power Retail Australian Listed E-Comm Index, based on ASX reporting

So what accounts for Booktopia’s solid position? “The pandemic has changed the way people shop. Online shopping has grown massively and there is no going back. During the IPO roadshows I got asked that question a lot. The way I was being asked sounded like they were describing a tsunami. It inundates the land and returns to the original shoreline once the water recedes. It’s not like that at all. It is more like a Japanese bullet train and we have been shot down the track faster than we were expecting. There’s no going back,” Nash adds.

Many commentators talk about the e-commerce bubble bursting, and we’ve previously said that in terms of bubbles, it’s hardly a matter of popping and more a case of continuing to float along. The bullet train comparison seems far more apt. Especially in the case of Booktopia and co.

“Perhaps one of the reasons Booktopia has performed well post IPO is because we are a real business. The capital raised is going into automation, software, stock, people, etc. These are all the things that we have done for many years. It’s all about selling more books,” Nash tells Power Retail. Indeed, when we’ve seen ASX-listed e-commerce companies falter, much can be said about levels of transparency. Cettire’s sudden fall last week is one such example, with questions raised about its business model and the technology it was using.

Booktopia’s trajectory is hardly setting off fireworks, but that may be the very point. “One other reason our share price may not be moving around too much is we are very illiquid. There are not enough shares available to trade at the moment. There is too much demand and very little able to be sold,” Nash explains. In September 2021 there will be shares coming out of escrow, which means this may change.

Like Booktopia, Bike Exchange and Temple & Webster are both sitting steady. Bike Exchange is showing little movement (0% over 14 days) and closing at $0.25 on Monday, while Temple & Webster shares increased by 7.7% over the same period.

In contrast to these steady performers, it seems however that marketplaces Redbubble and MyDeal have fallen out of favour with investors, both dropping by around 33% over 60 days (MyDeal at -32.4% and Redbubble at -33.5%). No doubt investors will be waiting eagerly for FY21 results, which will swing their prices one way or the other.

The pandemic may have propelled retailers forward like a Japanese bullet train, but the fact remains that not all ASX-listed companies will be able to handle the speed and remain on the track.

Figures are current as at close of ASX on 23 June 2021. This is analysis only and not intended as investment advice.

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