RE: Boohoo's Strategic Acquisition - Paul Scott - Stockopedia's Small Cap Value Report26 Jan 2021 11:43
Paul Scott was a Finance Director for a fashion company before leaving to become a private investor and write for the likes of Stockopedia's Small Cap Value Report. I subscribe to Stockopedia for £25 a month and it's well worth it.
Here's the rest of what Paul Scott has to say:-
Directorspeak- Mahmud Kamani, Executive Chairman commented -
"This is a transformational deal for the Group, which allows us to capture the fantastic opportunity as eCommerce continues to grow. Our ambition is to create the UK's largest marketplace. Our acquisition of the Debenhams brand is strategically significant as it represents a huge step which accelerates our ambition to be a leader, not just in fashion eCommerce, but in new categories including beauty, sport and homeware."
My opinion - this looks an excellent deal, and should significantly boost future growth, on top of the existing strong organic growth - last reported at 35% of the 40% total revenue growth, despite there being no Christmas parties to sell dresses for.
BOO is buying a significant-sized marketplace website, with a large number of existing customers, for a relatively small amount of money. Therefore, logically the share price should respond positively to this news. However, we already know that the stock market does not behave in a rational way towards BOO, you only have to look at the chart to see the mad gyrations in price, so the share price could do anything in the short term!
I remain of the view that ESG sellers have created a series of wonderful buying opportunities for a spectacularly good growth business.
For me, the short term price is just background noise. The key thing is that BOO probably has the hardest working & most capable, experienced & ambitious management/team in the sector. I see it as a major, international, long-term winner. This deal puts another piece into the jigsaw. Very good news in my view.
Zeus forecast is for 11.68p adj EPS for the new financial year that starts shortly, FY 02/2022. Therefore at 345p per share, the valuation is a PER of 29.5 - that is stonking value, for a share which has achieved this growth, with lots more to come.
The DEB deal should considerably accelerate future years' growth, but as usual, it's likely to take c.2-3 years to bed in the acquisition & get it growing to its full potential.
I subscribe to Research Tree too, this gives you access to research from the likes of Zeus Capital. You can subscribe to Research Tree for as little as £6.99 for access to research on two companies only.
I subscribe to Stockopedia, Research Tree and the FT. By reading all these gives me the confidence to keep holding my Boohoo shares. In the past I've subscribed to Motley Fool and Simply Wall St.
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