SINGAPORE (Apr 9): UOB Kay Hian is reiterating its “buy” recommendation on Y Ventures with a target price of 80 cents.
In a Monday report, analyst Nicholas Leow says, “From a low base in 2017, we forecast net profit to surge to US$2.7m as initiatives in 2017 look to bear fruit this year.”
These include the recognition of sales from Faire Leather (of over $400,000) from its launch in Kickstarter in Nov 2017.
In addition, the group announced in early-Jan that it had successfully secured over 20 new consumer brands and the revenue per brand is conservatively estimated to be about US$100,000 ($131,476) per annum.
In addition, the group has also grown its online book distributorship from one to five over the past six months, with meaningful contributions from 2018 onwards.
“We believe investors may have under-appreciated Y Ventures’ data analytics capability and have wrongly perceived the group to be mainly restricted to book sales or distribution,” says Leow.
The good sales of self-developed labels such as JustNile and more recently Faire Leather Co is a good proof of its proprietary data analytics capability.
The group has a 51% stake in Faire Leather Co, which was launched in Nov 2017 on the Kicktstarter platform holds the record of garnering a record pledge (or sales) of $406,000 in less than 50 days, making it the most successfully-funded Kickstarter campaign ever launched in Singapore.
“Given the high visibility of this successful joint venture (JV), we believe this paves the way for more new collaboration between Y Ventures and other partners,” says Leow.
Meanwhile, the group announced it will be partnering Singpost to develop AORA, a global buying platform that will focus on cross-border purchases on behalf of consumers across Asia.
See: Y Ventures and SingPost in MOU to develop cross-border e-commerce buying platform
The analyst believes that this partnership could mean a new growth trajectory for the group.
Although this may not be a new concept, the AORA platform stands out for its data analytics provided by the group, which could curate the product offerings to its target market, as well as localisation of the platform.
“We believe SingPost will handle logistics to provide timely delivery at competitive pricing. This would be key to AORA’s success given the importance of reliable last mile deliveries in e-commerce,” adds Leow.
The AORA beta platform will be launched in 3Q18 and is potentially scalable if it turns out to be successful. The cost to develop the platform is also not expected to be high as it is not an asset-intensive investment, but mainly staff costs.
“Our valuation is based on 2.6x 2019 price-to-sales, which is at a 20% discount to listed peers’. We opt to be conservative given Y Ventures’ smaller market capitalisation and limited earnings visibility,” says Leow.
As at 11.08am, shares in Y Ventures are trading at 54 cents, giving it a FY18 price-to-earnings ratio of 30.9, with a dividend yield of 0.6%.
