Redbubble Limited

RBL Details

This report is an updated version of the report published on 21 April 2022 at 3: 55 PM GMT.

Q3FY22 & YTDFY22 (9 months ended 31 March 2022) Results: Redbubble Limited (ASX: RBL) runs an independent designers' marketplace selling apparel, bags, and gifts through Redbubble.com and TeePublic.com.

• Robust customer retention was reported across the two marketplaces, with ~47% of marketplace revenue (MPR) from repeat purchases in Q3FY22. The repeat rates from the first time Redbubble members/ customers within 12 months are reported to be higher than the non-members.
• RBL reports that the financial performance of Q3FY22 was broadly in sync with its expectations.
• From a longer-term horizon, YTDFY22 MPR has increased at ~28% CAGR in 5 years since YTDFY18.

Comparative YTD Performance, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces changes in consumer preference, income, weak macro fundamentals, increasing competition in the online space, and regulatory hurdles.

Outlook:

• RBL expects MPR in FY22 to be a slightly below the underlying MPR of FY21 and a negative single-digit EBITDA margin in FY22. However, margins are expected to expand considerably in the medium-term with revenue growth.
• RBL aspires to grow GTV (gross transaction value) above ~$1.5 billion, artist revenue to ~$250 million, and MPR of ~$1.25 billion per year in the medium term.

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 RBL gave a negative return of ~38.57% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.230 - $5.510. The stock has been valued using the EV/Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers, considering negative net margin in 1HFY22, a decline in YTD22 performance, and a high debt-to-equity ratio. For this purpose of valuation, few peers like Kogan.com Ltd (ASX: KGN), Marley Spoon AG (ASX: MMM), Adore Beauty Group Ltd (ASX: ABY) have been considered. Considering the current trading levels, growth in YTD marketplace revenue, robust customer retention, plans to invest in mid-term strategy, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.260, as of 21 April 2022, 11.00 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

RBL Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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