PauL Scott - Small Cap Value Report - COMMENTS AGAIN14 Jan 2021 10:50
Boohoo (LON:BOO)
(I hold - my largest position)
369p (pre market open, likely to rise today) - mkt cap £4.66bn
Trading update
This covers peak seasonal trading, 4 months to 31 Dec 2020.
It looks very good. Key points;
Revenue growth of +40%, both UK & International grew by the identical +40% percentage - better than Asos which grew sales over the same period by +23%.
Asos mkt cap of £5.3bn is 14% larger than BOO, which looks wrong to me - BOO should be worth more than Asos, as it's growing faster & makes a higher profit margin.
USA is noteworthy - becoming an important market, at 25% of total sales, and growth of +52% - this could trigger a further re-rating of the shares, once investors spot the growth potential in this massive market, only scratching the surface.
Gross margin down very slightly (50 bps) at 53.0%, again better than Asos, which achieved 47.4% gross margin in its last annual results (not stated in recent trading update).
Net cash of £386.9m looks very healthy.
Guidance for FY 02/2021 - revenue growth raised from 28-32% previously, to 36-38% now. Very impressive to be raising full year revenues guidance that much, near the end of the year.
Adj EBITDA margin c.10% - no change, as indicated in last update with interim results, published 30 Sept 2020. I'm very impressed that BOO has managed to absorb extra costs such as supply chain investigation & remediation, freight & carriage cost increases, etc.
Brexit - doesn't sound a problem, "small cost headwind"
Sir Brian Leveson is on BOO's website here, I've read the executive summary, which looks fine. No new issues.
Zeus has raised its EPS forecast EPS FY 02/2021 by 5.6%, to 8.7p, a PER of 40 (at current price of 350p, which has inexplicably fallen at the open this morning). Forecast likely to be beaten, as it assumes slow growth of only +9% in Jan-Feb 2021.
We should of course be focusing on FY 02/2022 earnings now, which are forecast at 11.7p, a PER of 29.9 - which looks terrific value to me, for an exceptional growth group. Particularly as BOO usually beats forecasts, which tend to be raised throughout the year. So the actual PER in 12 months time could turn out to be 20-25, not 29.9.
My opinion - this is a very strong update. Unless I've missed something, this should have moved the share price up, not down, so I've no idea why the market has initially reacted the way it has. Still, as we've seen repeatedly in the last year, spikes down with BOO are terrific buying opportunities.
All good, as far as I'm concerned.
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