Paul Scott - Small Cap Value Report - Stockopedia9 Feb 2021 11:22
Paul Scott's comments yesterday on Boohoo's acquisitions:-
"I don't think the stock market has yet grasped how significant this deal, and the acquisition of Debenhams are going to be for BOO. It greatly expands the group's demographics, and should see a step-change in scale of the group once these new brands are absorbed into the BooHoo machine.
Therefore, over time, I reckon we should see large increases in forecast revenues & profits.
Remember that these brands were already trading online, with a big customer base. In the case of Debenhams, the annual online revenues were about £400m, or £300m if we take off click & collect in-store. Put that on BOO's usual 10% EBITDA margin, and it's a potentially £30m boost to profits. Add onto that the growth that BOO's expertise in product & marketing should bring over time, and the £55m acquisition price for DEB could end up looking a remarkable bargain.
Ditto with the 3 additional brands acquired. At the end of Boohoo's announcement, it refers to revenues of £178.8m for the "continuing businesses" for FY 08/2020. Presumably that means online sales, as that's the continuing business. {Edit: also wholesaling, as today's Zeus note points out]
That's equivalent to an additional 14% revenues on BooHoo group's £1,235m revenues for its FY 02/2020. Add that on to the c.£300m additional revenues bought in from DEB, and we're looking at £479m of additional, annual revenues bought in. That's assuming under BooHoo ownership the 4 new brands just match historic online revenues. In practise, I suggest they'll be aiming to grow the historic revenues, aggressively.
Once all this starts to feed into analyst forecasts, I think we could see a big re-rating of the shares, to reflect a much faster growth rate."
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