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MySale’s a momentum play
We are staying positive on MySale (MYSL:AIM) despite its punchy valuation. The operator of online ‘flash sales’ or time-limited sales events not only has positive momentum, but also the balance sheet to invest for future growth.
Investors have chased MySale higher for its improving trading performance and Brexit-busting credentials, being very much an international business.
A positive trading update (20 Jan) revealed underlying EBITDA doubled to a better-than-expected A$3m (£1.8m) in the six months to 31 December. Online sales, the core business excluding low margin, declining wholesale revenues, rose 18% to $126.5m, reflecting healthy growth in the active customer base.
With net cash approaching $30m (£18.1m), MySale has the balance sheet to invest behind its global flash sales brands and in selective acquisitions. Meanwhile, a new strategic partnership with gilt.com, part of department store operator Hudson’s Bay, will boost its available product range.
N+1 Singer reckons MySale can reach 226p over the next 12-18 months, implying potential upside of 79%. For the year to June 2017, the broker forecasts pre-tax profit of $1.8m (2016: $1m) for 0.8 cents of earnings (0.49p) ahead of a surge to $4.1m and 1.9 cents the following year.
We agree with Panmure Gordon’s Michael Stewart, who believes ‘the shares justify a premium rating given that they are a recovery play and given that the company is operating on an inflection point of growth and profitability.’
MySale’s momentum means further upgrades are likely and we see upside from the current 126.25p.