Why DSK dropping in SP on US rate fears?, page-27

So a few reasons why I think we're trading down.

1. The business results. Q1 was weak, with Q2 likely not being too much better. Too many trading days lost whilst consumers weren't receiving excess income with nothing else to do (Jobkeeper + Lockdown).

2. Ties in well with point 1, but consumer confidence was at it's lowest January reading in 30 years (Commbank). COVID and poor political decisions (and/or communication/transparency) has decimated consumer confidence. Cities are dead, physical retail stores are struggling - and I'd be amazed if Dusk is any exception.

3. Inflation increasing have certainly eaten into margins and, as far as I can see, Dusk has not increased their prices so their just taking the margin hit (likely ties into point 2, it's hard to increase prices with a weak consumer)

4. Fed raising rates. There's a lot of talk here which I think is slightly off on how that works. It's fairly simple - rates are increasing, investors are able to get a better return elsewhere (still a bad return), and historically stocks have done poorly whilst rates are increasing - meaning many investors are trying to get ahead of the curve. Highly indebted companies will take even more of a hit (which luckily Dusk is not), poor timing to open a new credit facility but overall we're in a great position.

I personally am not buying at these levels as I think the H1 results will be pivotal to where this trades in the short term. I suspect they're not brilliant, but as long as we're trading under 15x EBIDTA (i.e. H1 EBIDTA comes in greater than $12.5-15m), I think we'll be fine.

Eroma should kick in by the end of Q3 and provide bottom line growth - bringing in some of our supply chain should help reduce the inflation effects if it persists at 5%+ for the medium term.

GL All, enjoy the volatility.