This is a VERY difficult one to value and you will see why. 1. BENCHMARKS USED The MS valuation report also used bricks and mortar businesses and non inventory businesses as part of their valuation metric discussions. I have limited mine to purely on line sale of inventory businesses. I cannot find any pure online retailers of only cosmetics. Strawberry Net based in HK but not listed. Closest benchmarks are: Kogan General Inventory Aust Temple and Webster Furniture Aust Red Bubble Fashion Aust ASOS Fashion UK Zalando Fashion Germany Chewy Dog Food USA Wayfair Furniture USA So what is the best benchmark to use ? On line fashion has been around for a while and thinking that Dog Food and Furniture may be the ones to look at ? 2. PROFITABILITY 2.1 Gross Profit to Sales Adore at 32% . Kogan at 25%, TW at 45%. Other fashion players around 40 to 48% . Chewy at 24% and Wayfair at 26%. Adore is a mid range performer. 2.2 Revenue to Total Operating Assets Adore at 3 times ,Kogan at 1.8 times , TW at 3 times, Other fashion playersaround 2 to 5times . Chewy at 6 times and Wayfair at 4 times. Adore at the low end of the range but much smaller than other players so this should improve with growth. 2.3 Gross Profit to Total Operating Assets Adore at 100% , Kogan at 44% , TW at 127%, Other fashion players around 70 to 200% . Chewy at 155% and Wayfair at 100%. Adore is a low to mid range performer here. I also believe this is an important metric to consider. 2.4 GMROI Possibly one of the strongest retail metrics. In short, how much gross profit does your inventory generate . Adore at 3.4 times ,Kogan at 1.1 times , TW at 11 times, Other fashion players around 3 to 28 times . Chewy at 5 times and Wayfair at 49 times. In retail anything over 3 times is OK . Once you get to over 6 times then the model is extraordinary. Adore is a low range player here. 2.5 EBITA to Total Operating Assets Adore at 14% , Kogan at 15% , TW at 14%, Other fashion players around 0 to 14% Chewy and Wayfair make losses at the EBITDA level !! Adore a good player here. 2.6 Summary The Adore business model is not fantastic on the critical profitability benchmarks of GMROI and Gross Profit to Total Operating Assets. They do seem to be able to generate reasonable EBITDA relative to other players . 3. ON LINE INDUSTRY OBSERVATIONS Kogan is very average on all metrics. Based on Adore, the on line metrics for cosmetics appears to be average to poor. On line fashion also appears to be average to poor . On line furniture is extraordinary on all metrics but they need to get operating expenses in line . On line pet food seems to be good. 4. PRICING As in all things IT related pricing is stratospheric. I am comparing Adore pricing relative to benchmarks on sales generation , gross profit generation and EBITDA generation relative to EV. You will see it is all over the place. 4.1 Sales generation Adore at 4.2 times ,Kogan at 4.5 times , TW at 8.3 times, Other fashion playersaround 2 to 3times . Chewy at 4.3 times and Wayfair at 2.9 times. A totally optimist value for Adore could be 4.4 times ( Average between Kogan and Chewy ) This values Adore at $7.10 . ( 5% premium ) 4.2 Gross Profit Generation Adore at 13 times ,Kogan at 18.5 times , TW at 18.9 times, Other fashion players around4.2 to 8.3times . Chewy at 17.9 times and Wayfair at 11 times. A totally optimist value for Adore could be 16 times ( Average between Kogan , TW, Chewy and Wayfair ) This values Adore at $8.40 ( 24% premium ) 4.3 EBITDA Generation Adore at 91 times ,Kogan at 56 times , TW at 200 times, Other fashion players around 48 to 200 times . Chewy and Wayfair loss making at the EBITDA level. A totally optimist value for Adore could be 111 times ( Average between Kogan , TW, and fashion benchmarks ) This values Adore at $8.00 ( 18% premium ) 5. SUMMARY I value Adore in range $7.10 to $8.40 AT BEST Worth noting that MS have valued Adore in range $6.70 to $9.00 Adore is the smallest player of all benchmarks so there could be a growth premium. Worth noting that share prices of ALL benchmark companies have increased with only ASOS remaining static. 6. CONCLUSION Probably worth a bet ?
