That gives me some confidence that you are cautiously...

First 7 Last

Share
Profile

Follow
hcosah

529 Posts.

255

28/02/24

19:55

Post #: 72654726
Share
Originally posted by MarsC: ↑

I must say, having just updated my spreadsheets, I'm feeling cautiously comfortable that there is substantial value here, and also comfortable that my previously communicated valuation (I can provide link, if anyone is interested) was unreasonably pessimistic (though it was overly conservative by intention).

There are a few good signs (in no particular order).
Gross margins seem to be overcoming the post-covid ructions.
The Ovato acquisition is almost behind us, & associated expenses & capex should be behind us by FY25.
The Ovato operational synergies should also be kicking in, by then.
The latest acqusition (JacPak) is a stand-alone business which was already well capitalised (PPE) at the time of purchase, & should benefit from IVE Group's exisitng infrastructure, without any new abnormals or restructures (keeping a close whatch here), and should only attract expansionary capital if the prospects look compelling.
Lasoo is showing more promise than I had previously been willing to entertain(*).
The above factors, combined, may be starting to reveal some fairly strong operating leverage.

Whilst H1 FY24 sales ("organic", ie adjusted for acquisitions) seemed somewhat soft, it needs to be acknowledged that retailer sales (ex food) are generally falling relative to H1 FY23, as they re-normalize following the crazy growth seen over covid. It particulalry needs to be noted that the most affected sector is the "household goods space" (HHG), which happens to be what IVE Group is most exposed to (constituting nearly a quarter of IVEs customer base, by revenue). A key point to be made here, I think, is that (on my viewing), over time IVE Group's revenues have broadly tracked retail sales, especially those in the HHG space(#).

All in all, whilst the value on offer does not look optically compelling(^) (though it does look fairly attractive, in my opinion), I continue to see (and now more than previously) substantial oportunity for upward surprise.

(*) On Lasoo, I think the commentary by the CEO about the fact that the platform (or "marketplace", if you like) is not owned by a retailer does offer a competitive advantage (ie, there is good reason for IVE's customers to view it as a partner, rather than as a competitor). This further underpins the fundamental point that Lasoo is simply an extension, or progression, from its traditional printed catalogues business.

(#) A paradigm that got inverted over the covid period, when HHGs retailers faced the upside-down world of surging demand & shop closures. This meant that retailers maintained their marketing budgets, but did not direct them through the channels serviced by IVE Group.

(^) And really, if the optics were compelling, I'd be asking myself "what does the market know that I don't?".

Expand

That gives me some confidence that you are cautiously optimistic. It was your early writings that attracted me around the $1.30 point. The valuation isn’t as compelling now as then but they have made progress in terms of industry share (yet to play out). However, I balance this against their increased debt position which makes me neutral about my enthusiasm. I guess it’s a hold for me with fingers crossed for some positive surprises (with the benefit of having bought at lower prices).

I owe you a bottle of Bodegas Arzuaga Crianza for the introduction here, the first time a post on hot copper lead me to a purchase!
IGL Price at posting: $2.19 Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

Reply