Since issuing a reassuring pre-close trading update in July, MySale Group Plc (LON:MYSL) shares have declined 40% resulting in a year-to-date drop of 62%, which looks completely unwarranted in our view given the company’s confident outlook. In the trading update, underlying EBITDA for FY18 (June) is expected to be at least A$11.8m, ahead of our (Zeus Capital) prior forecast of A$11.5m. FY18 sales growth is expected to be c.10% to A$295m, which whilst below our prior A$309m forecast (or 15% growth), has been of secondary importance to an improving gross profit margin as per previous updates.
The company’s strategic plan and continued investment in the proprietary tech platforms continues to deliver on various initiatives that are focused on achieving higher gross margins over the medium term, in addition to creating new business opportunities. To this extent, there is an obvious read across from last week’s c.A$20m acquisition of ClearPay by the A$4.3bn buy-now-pay-later fin tech firm AfterPay Touch to MySale’s proprietary Ourpay payments platform, that further illuminates the current valuation anomaly. A more detailed update on trading will be given at the full year results expected on 24th September.
Overall view and valuation opportunity. Management remain confident going into the new financial year as they continue to deliver improved operational performance and profitability. MySale Group Plc now has over 1m SKUs available online and over 2,500 brand partners that should support future growth in the core business alongside efficiencies. It remains our view that there is possible upside to come from new income streams including the retail marketplace, as well white label opportunities for the proprietary buy-now-pay-later payments platform Ourpay. MySale is an established e-commerce business that generates substantial revenues that is currently valued on an FY19 EV/EBITDA of just 8.8x and EV/Sales multiple of just 0.4x.
