Cettire Limited

CTT Details

Recent Business Updates: Cettire Limited (ASX: CTT) is a global online retailer which offers a large selection of in-demand personal luxury goods via cettire.com.

• Recently, Cat Rock Capital Master Fund LP has made a change to holdings in the company with a voting power of 9.77% against the previous voting power of 8.71%.
• The company intends to enter the Chinese online luxury market, which is likely to be the world’s largest market for personal luxury goods by 2025, indicating ~25% of the A$600 billion global markets and a potential market opportunity of ~A$150 billion for Cettire.
• With respect to the business expansion, the company has reached a partnership with JD.Com, a leading Chinese e-commerce platform, which has over 550 million active customers and is the largest online retail platform in China.

Insights of 1HFY22:

• For the half-year ended 31 December 2021, the company recorded a growth of 181% in sales revenue to 113.7%, supported by continued execution of its growth strategy.
• The active customers rose by 208% to over 208,700, which indicates the strength of its customer acquisition and retention strategy.
• Product margin for the period soared by 178% to $42.7 million, and delivered margin witnessed a growth of 118% to $24.7 million.

Key Risks: The company operates in a very competitive environment; whereby the rising market share of peers could impact its topline growth. In addition, demand and supply instability could hamper its operational performance.

Outlook:

• CTT commenced 2HFY22 with positive trading momentum, evident by the growth of 242% in gross revenue in January 2021. The company believes that it has tremendous growth opportunities in the markets such as the US, UK and Australia.
• On the back of the global growth opportunity, the company would be focused on maximising revenue by further investing in brand and customer acquisition to drive the long-term shareholders’ value.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of CTT is trading below its 52-week low-high average of $0.820 - $4.805, respectively. The stock has been corrected by ~19.99% in the past one month. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering the COVID-19 uncertainties and inefficiency in generating profits, etc. For the purpose of valuation, peers such as Adore Beauty Group Ltd (ASX: ABY), Kogan.com Ltd (ASX: KGN) and Mad Paws Holdings Ltd (ASX: MPA) have been considered. Considering the expected upside in valuation, entry into the Chinese market, growing revenue and active customers, optimistic long-term outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $2.410 as on 18 February 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

CTT Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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