The more I think about this acquisition the more I see the...

The more I think about this acquisition the more I see the upside.

The reason why they are able to make 15% Profit Margins is because they get to mark up the product twice. Something like 25% as a wholesaler for individual items and 25% to combine as a hamper, for a 50%+ gross margin. The risk will be if competition reduces this over time to lowest cost supplier like we've seen in mass e-commerce.

As for a potential Covid bump, there weren't lockdowns in the Christmas period in FY2021 so the $3.5m NPAT bought for 7x should be sustainable especially given 65% growth in revenue 'buffer' in FY2022 if sales have some sort of reversion.

Then there's the issue of multiple, online e-commerce businesses are getting valued at 30+ PE, whereas 2 hamper businesses were bought by Pental and Maggie Beer for 7x PE so there could be huge multifold arbitrage once the hampers for Pental become the dominant source of earnings.

We all know the legacy division is structurally flat and is valued for dividend income so the benefit of that part of the business is a stable 9% dividend yield which protects downside. But we also get the upside now from the hampers division of blue sky valuation and profit growth.