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By HotStockRockets | Tuesday 13 February 2018
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.
The Bulletin Board knockers and, we are afraid some of you, were predicting a Christmas profits warning from Sosandar (SOS). Oh ye of little faith. The trading statement covering December and January is absolutely stunning. The headline is that net revenues (sales minus returns) exceeded management expectations.
But it is the detailed KPIs that please. We are told that; “Strong seasonal sales were driven by both new customer acquisition and increased repeat purchase with key KPIs ahead of management expectations. Basket size, conversion rate and traffic to the website were all ahead of target. Investment in new marketing channels continues to accelerate customer acquisition. Customer promotional brochures showcasing, partywear, dresses, knitwear, outerwear, luxury leather and footwear categories drove both new customer acquisition and repeat purchases during the festive period.”
So it is not just that the IPO proceeds mean that Sosandar can offer more product and also market more to attract new customers, the key here is the increased basket size of those who are shopping but also the level of repeat business. So going forward the birds who run this company state:
“We achieved multiple sell-outs of a number of products, highlighting huge demand from both existing and newly acquired customers. Demand was so high that we have generated large waiting lists that we have fulfilled with repeat orders. Strong results from marketing activity, especially brochures, has given us the confidence to increase investment in this area, ahead of plan, to sustain and accelerate growth in trading results.”
What does that mean for forecasts? House broker Turner Pope was looking for sales of £1 million for the year to March 31 2018. We were already looking for £1.3 million and we now expect that number to be beaten so pencil in £1.4 million. Beating your year one forecast by that much is good going.
So what about the year starting 1 April 2018. Turner Pope forecasts sales of £3 million and a loss before tax of £1.3 million. We now expect sales to be in excess of £4 million and the loss before tax to be well under £500,000. Remember net cash as at the November IPO was £7.5 million so cash is clearly not a worry at all. What about the year to March 31 2020 when TP is forecasting sales of £5 million and a PTP of less than £1 million. I put it to you that those forecasts are just way, way too low. Profit could easily be double that. And remember that in just seven weeks time that will be “next year”.
Sosandar shares are now 17p-18p but that capitalises this company at just £18 million. Remember that companies such as ASOS and Boohoo have traded on forward PEs of 50-70 in the past. If we are right, at 17.5p mid, the shares are just 7 weeks away from trading on a forward PE of 9. You see the potential? There will be another trading statement around March 31 and this one should be on the radar screens of a lot more folks by then.
The stance remains STRONG BUY at up to 21p – target to sell 35p.
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