Interactive Investor

MySale's stunning fightback on track

28th September 2016 14:47

Lee Wild from interactive investor

Online fashion retailers have been popular investment recently. Boohoo.com upgraded sales forecasts again yesterday, while UBS has just added another 23% to its price target for ASOS. Now, a great 12 months at Australian peer MySale keeps its AIM-listed shares moving north.

We heard in July that both MySale's full-year revenue and underlying cash profit had beaten expectations, driven by stellar growth in South East Asia and the UK. Today, management confirms 7% growth in revenue for the year ended June to A$252 million after a 10% increase during the second half.

South East Asia surged by 20% to A$31.6 million and the UK by 139% to nearly A$10 million, causing gross profit to more than double. Top line growth in its home market was more modest, but still up 2.6% to A$211 million, and profit rose 12% to A$57 million. 

Strip out share based payments and cash profit, or EBITDA, came in at A$5.5 million, better than the A$5 million anticipated. It lost A$9.5 million last year. And adjusted pre-tax loss of A$17.8 million in 2015 became a A$1 million profit.

And chief executive Carl Jackson thinks this year is promising, too.

"We have seen an encouraging start to the current financial year," he says, "with performance ahead of our expectations and, although the key trading period still lies ahead, the board is confident in the group's prospects for the year."

Matthew McEachran at broker N+1 Singer is optimistic: "MySale has established a very strong position in the online global off-price market, where we see a huge growth opportunity," he explains.

"FY results highlight successful execution of the plan, a return to profitable growth, accelerating KPIs in H2 vs H1, and a clear strategy to create future value. It has unique international distribution capability and brand relationships in Europe and North America, including exclusives with some."

He sees "risk to the upside" and claims there's "clearly scope for value creation".

"Optically the stock looks expensive on c20x calendar year 2017 EV/EBITDA pending today’s changes," writes McEachran. "However, we argue the re-rating is well under pinned and see scope for further outperformance over the next 2-3 years on continued good execution."

Sir Philip Green and Mike Ashley will certainly hope so. Both the former BHS owner and the current boss of Sports Direct invested heavily at the start. They’re still billionaires, but they've taken a pasting in the press and from politicians for their business practices.

And their investment in MySale in 2014 looked like a horrendous mistake when the share price collapsed from an IPO price of 226p to 166p on its AIM debut. An error in the published float price was blamed. Then, six months later, a savage profits warning plunged the shares to just 36p from well over 200p.

MySale shares have rallied hard since April, when chairman Iain McDonald bought 100,000 shares at less than 51p each. He's doubled his money, and, on the current growth trajectory, prospects look good.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.