This stock puts lead in my pencil.
In my view, there are a few key reasons that will lead to KMD surgingback into the $2+ zone by the start of 2022. This milestone will represent theSP arriving at base-camp for a long trek into super stardom over the nextdecade.
The true beauty of this is that we can all rest assured that, while on thistrek, investors will remain snug and warm courtesy of the world-classproducts that Kathmandu and Ripcurl offer (yet to try Oboz boots). Come summertime, when we break the $2 range, we can... ride the wave so tospeak. I have found the confidence to talk about KMD in such a wankymanner due to the below combination of macro trends and brand value:
- I don't know if any of you have ever been to the Southern Highlands just outside of Sydney, but I have. This area is a stronghold for people who have so much money that they will buy a 'farm' as their weekend retreat. Just check out the real-estate out there online. These people are literally cashed up to the hills. I was there the other day, and I shit you not close to 30% of people I saw on the main strip in this town were wearing Kathmandu jackets. I don't blame them, they look sick. What this tells me is that Kathmandu has positioned itself as a brand that appeals to the upper echelons of society. On a basic level my point can be boiled down to the following: if the rich people are wearing it, this brand isn't going anywhere anytime soon. Now I could rant alot more on this specific topic and you can pick apart my anecdotal evidence as much as you like but I have more where that came from. KMD owns two brands - Kathmandu and Ripcurl - that are renowned for creating world class products. Ripcurl has been around since 60s and has been privately owned until the acquisition in 2019, after which the KMD SP surged to $2.47 before COVID put this bad-boy on discount for us all. Ripcurl is widely regarded among surfers to be in the 'Big 3' of surfing brands: Billabong, Ripcurl & Quicksilver. Now this part I could get called out on, but it's interesting nevertheless - most people I have spoken to about the KMD acquisition of Ripcurl have been somewhat surprised. They are surprised at the fact that Kathmandu acquired Ripcurl, believing it should have been the otherway round. Now take out of that what you will but the fact Ripcurl has been privately owned for 60 years and I can find sweet FA data on their revenue during that period makes me think that this seasonally-hedged duo could be a sleeping giant.
- Generating the vast majority of revenue in Australia and NZ, the limitations on international travel will not prove to be a major hindrance to KMD's recovery following COVID discount season. People have been locked up for way too long and they need a holiday. Even rich people who would otherwise be venturing to Europe or the US over Summer will still be holidaying. People are cashed up after not holidaying for sometime now. Rich Australians and kiwis will be travelling to Tasmania, New Zealand, the Northern Territory and South Australia. Since these rich people who won't be spending $1,500 on a return airfare to Europe or the US, I expect this cash to trickle down into the pockets of investors in KMD. If the rich tourists are going to be travelling domestically this year (and possibly the next) they're going to want to do it wearing something new to make the photos look a great deal better than what they first anticipated. I am confident that there will be an uptick in demand for KMD as a result of the above macro trend. The significance of such a trend, however, is up for debate and will no doubt be settled following the release of Q1 FY22 earnings. The thing is, with the Ripcurl acquisition, the same thing will happen over summer. Further, the restricted nature of our lives over the past 18 months will result in a boom in adventure tourism in the coming years. The reality is that people will want to get out, climb mountains, catch waves, ski, snowboard whatever it is. Both Kathmandu and Ripcurl are well-positioned to take full advantage of this. Additionally, there is undoubtedly an element of pent up demand following an extremely subdued winter last year. A majority of Kathmandu stores are based in Victoria and woul have been shut over the coldest parts of the year down there. Plus, no one was even doing anything anyway. Side note, winter in Melbourne looks like a pretty rough trot. On the plus side, at least you can a nice Kathmandu jacket to protect yourself from the warmth. And, while you or I may not be one of these people, there is a subset of society that feel the need to purchase new winter clothes as an annual or biennial ritual of sorts. KMD investors will be the ultimate beneficiaries of such bizarre tendencies.
Now please, take me to task on any of the above. Or, even better, bring somethingnew to the table that I am totally missing because at the end of the day weonly get better from hearing things that we are otherwise oblivious to. Iactually am slightly ashamed of myself for only getting onto this bad boy at$1.29 but even still at $1.51 I think it's discount city and has a long, longway to go. I would love to hear an argument against the genuine value that thisbusiness has to offer.
Obviously you're a total idiot if you base any investment decisions on whatI've just said. Alternatively, I would suggest you go buy a Kathmandu jacketand Ripcurl wetsuit/surfboard and feel the realness. Peace.
(20min delay)