Results tomorrow, hopefully an improving UK, Australia remains...

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OracleRhino

853 Posts.

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22/08/22

14:44

Post #: 63250414
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Originally posted by Nano_Land: ↑

I wouldn't be worried about the MD, he sold $41m of his holding to the retail shareholders of Morgan's at $1.53/share on the assumption of $15m EBIT (16x) which very quickly became $8.5m due to losses in the US and reduced profit in the UK.

That said, they also raised $40m in new capital at the same price ($1.53/share), and still have the bulk of this on balance sheet in the form of cash (~$30m) and excess inventory (~$10m).

So assuming a normalised $40m cash the core business is being priced at $15m or 2x downgraded/US loss making EBIT. This is the opportunity.

The absolute key issue here is the assumptions around marketing spend and resulting new customer acquisitions. STP will spend ~46% of sales on marketing this year ($34m) and roughly 54% in 2H ($19m) as they got excited with all their money for the US launch.

Going forward this spend should result in new customer sales, and added to existing customer repeat sales, higher sales & earnings. If it doesn't, then in theory STP could spend much less as a % of sales just targeting existing customers and see an EBIT jump to say $20m but be a little more mature in its growth profile. THEY WILL NOT KEEP SPENDING AT THE CURRENT LEVEL FOR MINIMAL ADDITIONAL CUSTOMERS.

My view, the starting point is $40m cash + 6x a mature $12m EBIT from Oz alone = $112m or 60cps.

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Results tomorrow, hopefully an improving UK, Australia remains solid and either some traction in US or put it on hold for a while whilst they get UK right. Womens and Thermal range updates also eagerly awaiting.

STP Price at posting: 33.0¢ Sentiment: Buy Disclosure: Held
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Last 66.5¢		Change -0.045(6.34%)		Mkt cap ! $123.2M

Open	High	Low	Value	Volume
70.0¢	71.0¢	64.5¢	$308.7K	464.9K

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No.	Vol.	Price($)
2	3818	65.5¢

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Price($)	Vol.	No.
66.5¢	3960	1

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No.	Vol.	Price($)
2	3818	0.655
1	20000	0.650
1	780	0.645
3	21160	0.640
1	20000	0.625

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