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By HotStockRockets | Tuesday 12 December 2017
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Sosandar (SOS), the online women’s fashion retailer, has announced an update on trading. That is the bones. We have chatted to the company and can put some meat on those bones. The news is good. Very good.
“trading since 31 August 2017 to the end of November has exceeded management expectations. The new funds raised at the time of the reverse takeover on 2 November 2017 are enabling the business to acquire larger and wider ranges of product and has also enabled the business to accelerate its media and marketing activities. Investment in new marketing channels has yielded strong results and will be further expanded in order to drive new customer acquisition.
Julie Lavington and Ali Hall, Joint CEO’s, commented: “We are delighted with the progress we have made to date and the additional funds we have recently raised has allowed us to drive significant momentum into the business. Our depth of product is expanding, we are now able to buy larger lines of product, thus reducing lead times and increasing margin.”
What does that actually mean? House broker Turner Pope has not altered its current year to March 31 sales forecast of £1 million although it today states that this is ”a forecast that the company could be on track to exceed.” Of course it damn well is. The company is trading ahead of management’s forecasts and those forecasts are communicated to the market by the house broker, i.e. Turner Pope.
Thus we would be shocked if the FY sales number was not AT LEAST £1.3 million. The issue is what will Sosandar do next year? Turner Pope had forecast sales of £3 million but what is particularly pleasing is the high level of repeat business now being generated. That is to say folks buying a second, third, fourth or more time without being targeted. So we would now assume that sales next year will be at least £4 million which suggests that the March 2019 forecast Loss Before tax will not be £1.3 million as currently forecast but closer to £500,000 and that also implies that by H2 next year Sosandar will be past the breakeven point.
So whereas we were expecting a maiden profit of less than £1 million on sales of £5 million in the March 2020 year, we would now hope for a seven figure profit on sales of well over £6 million. Thereafter the ramp up is likely to be rapid.
Those who predicted a profit warning/cash call were talking rubbish and that is now demonstrated. We’d hope for a further and far more detailed update on trading after Christmas but it is clear that things are going very well, something not discounted in an 18p-18.5p share price.
The stance is, at up to 21p, BUY with a target price of 35p.
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