Livewire article $6 fair value

James Marlay: Okay. Well, I lobbed four idiosyncratic ideas and for the two of you to give us your views. We've also asked you each to bring along a stock that you think looks good for the next 12 months. Emanuel, I'm going to start with you. Can you pitch us an idea for the next 12 months in that small-cap space, something that's got you excited and give us the theses on it?

Dusk Group (ASXSK)

Emanuel Datt: Yeah, absolutely. My pick would be Dusk Group. Dusk is an Australian homewares retailer, best known for its scented candles. And it just recently floated on the ASX in November 2020. It has about 120 physical stores. And somewhat uniquely, since floating, the company have released three consecutive positive earnings upgrades. And it basically demonstrates very strong sales growth, but also importantly, margin expansion, which is basically the holy grail of retail. The company continued to grow towards its long-term goal of 150 stores in Australia. But interestingly, it's also commencing its international expansion with New Zealand first off the rank. So some really interesting things we consider for the company going ahead is that the UK and the US markets have been flagged for future expansion. And I think just the metrics of the company are just absolutely incredible.

Each store turns in about a million bucks of revenue and you can compare that with other great retail chains like Lovisa. That's double Lovisa's revenue per store, basically. And it has strong customer loyalty, it's been growing its customer loyalty program by 50% over the last 12 months. But also the company trades incredibly cheaply for a growth stock. It currently trades at an EBIT multiple of about six times, which is closer to a private market value than a public market value we think. We value the company as it stands at about $6 a share and today it trades for a little under $4. So we think there's quite a bit of upside potential going forward for the stock.