SINGAPORE (Mar 28): DBS is starting e-commerce player Y Ventures at "buy” with target price of 77 cents.
Y Ventures distributes products from third-party brands over some of the largest e-commerce platforms like Amazon and Lazada across 10 countries.
In a Tuesday report, lead analyst Carmen Tay says unlike traditional distributors & e-commerce platforms, Y Ventures stands out for its provision of value-added data analytics service to brand partners.
This allows brand partners to adapt their products to the market needs. In return, the brands offer significant price discounts to Y Ventures.
In addition, the launch of private labels like JustNile and Faire Leather Co. in areas where Y Ventures can achieve strong sell-through rates based on analytics, further augments margins.
According to Tay, the group’s earnings growth should primarily be driven by three factors.
Firstly, the expansion of its brand partner network and product range to drive earnings growth, such as R3 Asian Gems, which is a fund linked to Ron Sim, the founder of V3/Osim group.
The fund will help the group to introduce new retail brands, strategic alliances and possible acquisition targets.
Secondly, the group’s efforts in replicating the Elsevier partnership model to other book publishers and new product categories.
See: Y Ventures raising funds to build data analytics, grow private label
Thirdly, the group’s acceleration of private label projects that tend to have longer gestation periods, but offer higher margins.
Furthermore, the analyst believes that the group cross-border purchase platform AORA could provide further upside once it starts contributing from FY19 onwards.
See: Y Ventures and SingPost in MOU to develop cross-border e-commerce buying platform
“Due to limited visibility, we have yet to factor this into our projections,” says Tay.
Since the stock is still in its early stages of growth, the analyst believes that its SGX listing adds credibility and serves as a valuable aid to its ongoing efforts to further expand its brand partner and product portfolio.
Hence, its exponential growth potential and unique exposure compared to its technology cluster peers should continue to drive interest in investors.
Currently, the stock is trading at 23 times FY19 EV/EBITDA, a 15% discount to larger peers’ 23 times due to the group’s smaller scale.
As at 12.33pm, shares in Y Ventures are trading 4 cents or 8.41% higher at 58 cents, or 46.5 times FY18 earnings.
