Stock of the Day - iBUY Group Limited (BUY)
iBUY Group Limited (IBY), the leading Australian-based e-Commerce business in the South East Asia and Hong Kong region with flash sales as a specialty, is featured in today’s daily. The economic conditions given growing population in Australia and strong GDP growth; strong retail sales growth with a healthy Asia-Pacific e-commerce forecast; and deeper penetration of internet and smartphone segment in core markets, set a favorable platform for IBY.
Financials (Source – Company Reports)
This leading Asian e-commerce Company witnessed a gross turnover of about A$71.2m for the six month period ending as at 30 June 2014. This resulted in revenue of ~A$25m. The sales were up in all the markets of operation during said six months with an increase in number of unique visitors and number of orders. There was a loss of A$6.6m in view of investments in growth and integration of acquired assets. This loss also included the one-off costs associated with the LivingSocial acquisition. During aforesaid period, the Company’s Management also identified ~$1.0m of redundancy costs.
Total Gross Turnover (Source – Company Reports)
The H1 2014 demonstrated positive results with good level of confidence from entry into new markets (such as Thailand, Philippines and Indonesia) by virtue of IBY’s acquisition mode. The key example includes acquisition of LivingSocial South East Asia which facilitated IBY to gain a good control over entities. The Company believes to achieve the goal of “one brand and one technology platform” by Q1 2015.
H1 2014 Total Gross Turnover in % per Country (Source – Company Reports)
There are 6 South East Asian countries in which IBY operates. This equates to a total of 8.2m email subscribers and pro forma H1 14 gross turnover of $71.2m (as at June 2014).
Business Snapshot (Source – Company Reports)
The e-Commerce business focused on flash sales in South East Asia enables the retailers, wholesalers and manufacturers to sell-off obsolete/ excess/ out-of-season inventory efficiently. The model entails the following steps – IBY businesses agree with supplier to sell aforesaid type of products through its websites; Supplier ships the order directly to IBY on consignment basis; IBY’s websites sell the products through flash sales, time and again; IBY then ships items to individual buyers based on purchase; (6) Unsold inventory are shipped back to the supplier. This model allows for reduced infrastructure and overheads with low inventory risks.
Flash Sales Business Model (Source – Company Reports)
IBY is also making efforts in setting up tailored logistics and warehouse systems to suffice the flash sales needs. Even the IT system is well-established to support huge traffic points and is characteristic of features such as customized CRM system, and sophisticated data and business intelligence to support a focused platform.
IBY’s Approach_Merchandising (Source – Company Reports)
Some of the renowned brands that are presented on IBY’s websites include – Prada, Fendi, Mango, Philips, 3M, Nine West, Zara, Sony, Apple, Ray Ban, and so forth.
Overall, the Company has been able to build a leadership position with regards to the online discount retail market. IBY is also emphasizing on few strategic objectives. For example, the Company is now aiming to underscore lowering its delivery turnaround time. More specifically, IBY’s rollout of mobile applications is complete which will enable it to reduce delivery times in coming six months or so. Other efforts are to do with increasing quantity and quality of products put up for sale and any strategic acquisition which may reap fruitful results.
IBY Daily Chart (Source - Thomson Reuters)
IBY is also moving in a direction to have an expanded customer base, quantity and quality of offers, and geographical footprint. Nonetheless, the Company shall be able to take steps to mitigate some of the risks that appear to be associated with highly competitive market full of players such as Groupon, Living Social, Google and Amazon Local; merchandising and product quality sustenance; unwavering product offering base even in view of long-term or short-term relationships with suppliers; and any risk associated with currency changes. A balance between cash reserves and liabilities is another point to ponder upon.
Based on its turnover, iBuy Group has been recently recognized as the number one e-commerce player in Southeast Asia according to a ranking by Business Insider Singapore, which is the Singaporean edition of a leading business and technology news website. It is noted that the Company capped four other e-commerce sites with a turnover of S$153 million.
Of course we also note a few falls in the stock price, however, the overall game plan of IBY looks interesting. Thus, given all of the above points, we put a BUY recommendation for this stock at the current price of $0.20.
Note - The following report was covered in Kalkine Daily on 24/10/2014
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