MySale Group Plc (LON:MYSL) has announced the acquisition of Identity Direct, a leading online retailer of personalised products, for a consideration of A$2.7m to be funded from existing cash resources. In the year to 30 June 2016, Identity Direct had revenues of c.A$10m. We are assuming no contribution to FY17 forecasts given the proximity to year end, and revenue contribution of A$10m in FY18. We are assuming a 5% EBITDA contribution margin in FY18, therefore our adj. EBITDA estimate increases by A$0.5m, or 4.3%, to A$11.5m. The acquisition is complimentary and adds a database of 66k active customers that is estimated to represent c.A$2m of value when compared to MySale’s average acquisition cost per active customer.
A leading international online retailer of personalised products. Founded in 1992, Identity Direct has an established track record in providing customers with personalised gifts and products, including apparel, sporting goods, labels and books, and has partnered with global brands such as Disney, Marvel and Nickelodeon. The acquisition also includes a small, skilled workforce, stock and customer lists as well as a leasehold production centre in Auckland, New Zealand, where products are personalised to the customer’s requirements and shipped globally.
Complimentary acquisition that ties in with existing customer base gives rise to growth opportunities. The acquisition gives MySale exposure to well established licensing relationships, as well as a broad product range of personalised products that fits within existing customers requirements giving rise to cross merchandising opportunities. There are also opportunities to drive growth by cross marketing to the SE Asia markets, where MySale is strong, as well as reactivating customers in the existing database who may respond well to the Identity Direct product range. As part of the MySale Group there is also scope to increase the range of products for personalisation as well as develop new licences with existing and new brand partners.
Synergy opportunities. There is scope to reduce operating costs by combining shared services, leverage lower shipping rates and reduce other back office costs. The Identity Direct operations will benefit significantly from the support available from MySale’s resources and infrastructure which should in turn deliver an improved offer and service to customers whilst enhancing efficiency.
Overall view. The acquisition gives MySale a leading position in a unique product market with scope for driving growth by leveraging their size, infrastructure and existing customer base. MySale is a business that generates substantial revenues that are currently valued on an EV/Sales multiple of just 0.8x. The e-commerce peer group trades on an average FY1 EV/Sales multiple of 2.0x. If MySale traded on 1.5x it would equate to 184p.
