CTT - Strong Buy

I stumbled across this glorious stock which is delivering exponential sales massive growth (whilst remaining profitably) and poised for multi-bag returns. Currently flying under the radar as it was only listed late last year.

FYI – I am long this stock and this is my opinion only. Do your own research on this stock (or any damn stock) before you pull the trigger and BUY. This is my interpretation of CTT only.

In a more general sense this stock reminds me of PBH.ASX maybe 18months ago when it had freshly listed and was still in the aggressive growth stage. I see a similar price story unfolding with CTT.ASX. Everything is in place.

What is it?

• - Cettire.com

• - Pure-play online marketplace of luxury goods. 90% of sales from outside Australia. 160,000 items from 1,300 luxury brands. Think Burberry, Saint Laurent, Gucci, Prada etc.

• - Listed late last year and flying under the radar. No broker reports on this one yet. Poised to spike when the fundies inevitability jump in. The sales growth is too damn good to ignore (more on that below...)

Why should I consider holding this stock?

• - Does NOT hold any inventory. Cettire’s business model is enabled by a proprietary technology platform to manage and largely automate product and inventory management, pricing strategies, customer order fulfillment and global logistics. Cettire’s scalable proprietary technology stack requires minimal labor intervention for day-to-day operations. The platform has been designed to acquire large volumes of customers, process and fulfill large order volumes and integrate, maintain and manipulate large data sets of products from suppliers with a very high degree of automation.

  • - And it works great - for the 12 months to 31 October 2020, the Cettire platform originated and fulfilled 66,232 orders globally with ONE full-time staff member dedicated to logistics!

  • - TLDR: Think ‘the uber eats of luxury products". How it works...see image:

• - Outstanding revenue growth – YoY over 200% increase in sales revenue FY20->21, with Product Margin of 38%! Just look at this sales growth:

  • FY18 $545,000

  • FY19 $5,700,000

  • FY20 $22,800,000

  • FY21 $70,000,000

    • - (Did I mention that CTT is profitable..and those profit margins are fantastically chunky?!)

    • - Popular with younger consumers (57% of CTT’s sales are to 34yo or younger) which is great given their increasing disposable income and ability to influence purchasing decisions of other age groups.

    • - CTT is geographically diversified with 90% of sales from outside Australia. In that sense, this is a stock that gives you exposure to the growing global luxury market...more on that below

• - Favorable economic environment

  • - CTT serves the wealthiest consumers...and the wealthiest members of society became even more wealthy due to Covid, and they need to spend their spoils somewhere.

  • - May I note that Lamborghini just had their best sales year ever? CTT targets those same consumers! https://www.caradvice.com.au/819698/lamborghini-posts-all-time-sales-record/

  • - CTT is a stock that benefits from increased income inequality...which is at record highs around the world. You may perceive this as a bad thing or a natural outcome depending on your political stripes, but what we should all agree on is that this is brilliant for CTT.

  • - If you are interested in other trades that benefit from rising income inequality, consider reading Citigroup’s “Plutonomy Papers”…many years ago Citi sent a memo to their richest client’s stating there is no such animal as the “the U.S consumer” or “the Australian Consumer” but rather the rich consumer and everyone else. In a recent study by the US Federal Reserve, they reported that the top 1% owned 38.5% of America’s wealth. So given their disproportionate share of the pie, HOW the rich spend is more important than how everyone else spends...everyone else can barely move the needle with their spending habits. The rich are here to stay and getting richer. Hence, buy stocks that offer products rich consumers like..like CTT. Full report: https://pissedoffwoman.files.wordpress.com/2012/04/citigroup-plutonomy-report-part-1.pdf

  • - It is also worth looking at the CLEWI (Cost of Living Extremely Well Index) which tracks a basket of luxury goods, published by Forbes annually. Coincidentally, many of the products on the CLEWI are sold by Cettire. Historically, CWELI has outpaced CPI..probably because the rich continue to get richer. Yet another positive sign.

• Low industry concentration

Online luxury sales is a market that is characterized by low (but growing) online adoption, high fragmentation of existing players, and historically highly controlled distribution channels by the brands themselves. CTT amalgamates product offerings from a global network of suppliers offering a one-stop-shop for rich consumers wanting to buy luxury. This gives suppliers the control they desire but reduces working capital requirements and risk for CTT. Win-Win.

I hear you scream “bUt wHaT aBoUt AmAzOn??!”….well, Amazon dominates mass-market online retailing. We know this. But the one sector they cannot crack is the luxury space. Luxury brands aren’t merely selling clothing...they are selling heritage, rarity, and status. And this is all undone on a platform littered with fakes and having your brand’s $2300 handbag listed next to a disheveled, drop shipped Alibaba garment.

There are many luxury brands that will not sell on Amazon. The CFO of LVMH, which owns Celine, Dior, Givenchy, Louis Vuitton and several other luxury labels, has said:

“We believe the business of Amazon does not fit with LVMH, full stop, and it does not fit with our brands...There is no way we can do business with them."

Source: https://www.reuters.com/article/us-lvmh-sales-call-idUSKCN12B28N.

Nike won’t deal with them either https://www.cnbc.com/2019/11/13/nike-wont-sell-directly-to-amazon-anymore.html citing the issue of fakes. However, these brands are sold on Cettire.

• - Other supporting factors:

  • - Prior to listing late last year, CTT spent $1.9m on marketing. Following the IPO, they have set aside $11.23m for marketing. The cost of paid customer acquisition in FY202 was $67, providing an average return on investment to CTT of $215, a 300% return. Given this, and now with a much, much larger marketing budget, this will pour petrol on an already raging fire. I’m expecting a massive increase in sales when they report next. Get in early!

  • - Strong online reviews – Trustpilot gives Cettire 4.4 stars from 9,000+ reviews https://au.trustpilot.com/review/www.cettire.com

  • - CEO is heavily invested and aligned with shareholder interests owning 65% of the stock on issue.

Final notes

This stock has basically no coverage by brokers and will shoot up as others learn about it. Scalable, tech-driven ecom play with little competition that’ll benefit from the growing inequality around the world. I’m all in.