tag:blogger.com,1999:blog-90087079820904704132024-03-24T16:32:05.863-07:00Stock analysis and other stuffMatthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.comBlogger115125tag:blogger.com,1999:blog-9008707982090470413.post-8512041712103633142017-05-12T02:58:00.001-07:002017-05-12T02:58:49.386-07:00All good things ...<div style="text-align: right;">
Friday 12th May 2017</div>
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Seven years is a long time to wait but at long last, PwC, the auditor to Connaught Plc, the latter which collapsed into administration due to accounting irregularities in early 2010, has finally been fined for signing off the books. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjt5JJ454-OcdNCbAoWUxmd7_XF9dfzvPNScvHpniLo1wyqpXAhqCMgA2UtcCWtNb4KtG8K6tZMO_dCJ-B4PCGjLulOVcxy6UzomhFjcdKAyFUGBpzyp2MIag7tdNqhLXd5tRoKMvLM7Ag/s1600/PwC.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="141" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjt5JJ454-OcdNCbAoWUxmd7_XF9dfzvPNScvHpniLo1wyqpXAhqCMgA2UtcCWtNb4KtG8K6tZMO_dCJ-B4PCGjLulOVcxy6UzomhFjcdKAyFUGBpzyp2MIag7tdNqhLXd5tRoKMvLM7Ag/s400/PwC.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">PwC fined £5 million<br /><i>Source: <a href="http://news.sky.com/story/pwc-fined-1635m-for-connaught-audit-misconduct-by-accountancy-watchdog-10872238" target="_blank"><span style="color: cyan;">Sky News</span></a></i></td></tr>
</tbody></table>
<div style="text-align: justify;">
The full story can be read here: <span style="color: cyan;"><a href="http://news.sky.com/story/pwc-fined-1635m-for-connaught-audit-misconduct-by-accountancy-watchdog-10872238" target="_blank"><span style="color: cyan;">PwC has been fined a record £5m for failures relating to its audit of FTSE 250 property services firm, Connaught.</span></a> </span></div>
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Here I am, looking somewhat younger and more sprightly ...</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpepFw7UiIKI7w3HWoWixSulX9D795CJt8yOgmjOrMAIIixn1XAYr40OIcf-JT51l98svIttNk0oaYPftwQCr93YwwZE5JNwa5-XUXueSX-t2oBeGmih3hXQN4fu0oh_Pqnv7I4Oa2GYk/s1600/City+Sceptic.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpepFw7UiIKI7w3HWoWixSulX9D795CJt8yOgmjOrMAIIixn1XAYr40OIcf-JT51l98svIttNk0oaYPftwQCr93YwwZE5JNwa5-XUXueSX-t2oBeGmih3hXQN4fu0oh_Pqnv7I4Oa2GYk/s400/City+Sceptic.jpg" width="365" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">City Sceptic Strikes<br /><i>Source: <a href="https://www.ft.com/content/6580fc42-5008-11e0-9ad1-00144feab49a" target="_blank"><span style="color: cyan;">Financial Times</span></a></i></td></tr>
</tbody></table>
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Readers may note the amusing commentary from Connaught's CEO at the time, Mr Mark Tincknell. </div>
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After I issued a Sell note on Connaught, Mr Tincknell sent an email round to other sell side analysts, investors and the media telling them that I was under the pay of hedge funds - that were short of the stock, that I was generally incompetent, and had got all my numbers wrong. He had a point with regards to my numbers. I'd massively underestimated the bad debts, and other borrowings that Connaught had hidden. </div>
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There were several lessons I learnt from that period. </div>
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</div>
<ol>
<li>Crooked management will go to great lengths to smear and traduce those who speak out against them. </li>
<li>Director purchases are meaningless when not placed into context or it is not revealed how those purchases may have been financed. See <a href="http://www.lordshipstrading.com/2014/07/director-purchases-and-sometimes-lazy.html" target="_blank"><span style="color: cyan;">here</span></a> and <a href="http://www.lordshipstrading.com/2016/12/wirecard-wdi-gr-skin-in-game.html" target="_blank"><span style="color: cyan;">here</span></a>. </li>
<li>Other sell side analysts will not hesitate to rally to the defense of crooked management.</li>
<li>Anyone that speaks out against a company will generally be ignored by its major investors who fall into a peculiar state of denial. </li>
<li>When things unravel, the company blows up faster than you can say <i>"das ist nicht so gut"</i>.</li>
</ol>
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Not a lot has changed.</div>
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The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
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source of information is referenced to for verification. While every effort has
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the author accepts no responsibility for the accuracy of any information
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Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com0tag:blogger.com,1999:blog-9008707982090470413.post-78201882173492203752016-12-06T02:11:00.001-08:002017-01-11T08:32:28.275-08:00Wirecard (WDI GR) ... 'Skin in the Game'?<div style="text-align: justify;">
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Tuesday 6th December 2016</div>
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<br />
No sooner had I finished writing the post below, than I was alerted to yet another range of alarming concerns being raised regarding Wirecard (WDI GR). Whereas originally, there was the:<br />
<br />
FT (<a href="https://ftalphaville.ft.com/2015/04/27/2127427/the-house-of-wirecard/" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2015/05/05/2127886/the-strange-case-of-ashazi-wirecard-in-bahrain-via-singapore/" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2015/05/26/2128751/wirecard-gibraltar-and-an-asset-rich-wind-up/" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2015/07/23/2131270/wirecard-adjust-your-perspective-part-1/" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2015/07/23/2134015/wirecard-adjust-your-perspective-part-2/?Authorised=false" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2015/07/27/2135267/wirecard-calculating-the-adjustments/?Authorised=false" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2015/08/17/2137497/wirecard-a-rolling-processor-gathers-no-loss/" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2016/02/25/2155726/shares-in-fintech-darling-plunge-on-critical-report/" target="_blank"><span style="color: cyan;">here</span></a>, <a href="https://ftalphaville.ft.com/2015/11/12/2144182/rupee-do-what-is-wirecard-buying/" target="_blank"><span style="color: cyan;">here</span></a>, and <a href="https://ftalphaville.ft.com/2015/04/27/2126473/the-wirecard-documents/" style="color: cyan;" target="_blank">here</a>),<br />
<a href="http://www.jcapitalresearch.com/" target="_blank"><span style="color: cyan;">J Capital Research</span></a>,<br />
then <span style="color: cyan;">Zatarra Research & Investigations</span><br />
<br />
THIS time, an <a href="https://twitter.com/whistleblowerwd" target="_blank"><span style="color: cyan;">unnamed author</span></a> has meticulously pieced together a whole range of information. It is fascinating stuff.<br />
<br />
This follows on from the engrossing article published a few weeks back in Reuters:<br />
<a href="http://www.reuters.com/investigates/special-report/britain-consett-companies/" target="_blank"><span style="color: cyan;">How a British town became a hub for online porn and poker</span></a><br />
<br />
As for me, I have written on Wirecard before (<a href="http://lordshipstrading.blogspot.co.uk/search/label/Wirecard" target="_blank"><span style="color: cyan;">see here</span></a>), focusing on its acquisition of the Indian, GI Retail business.<br />
<br />
This post will likely be another of a series of further posts looking at Wirecard.<br />
<br />
In the spirit of openness, I am short Wirecard. Wirecard is my biggest short position since Globo (GBO LN). In fact, my confidence has persuaded me to make it my biggest short ever. Time will tell if this is mere swagger. However, my money is where my mouth is which is not altogether clear for others, and so on that subject I present these observations below ...<br />
<br />
<h3>
Director Purchases</h3>
I've written on Director purchases before: see here - <a href="http://lordshipstrading.blogspot.co.uk/2014/07/director-purchases-and-sometimes-lazy.html" target="_blank"><span style="color: cyan;">Director purchases and sometimes lazy longs</span></a>.</div>
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By and large, investors like management with stakes in the companies they run. The thinking goes, that with 'skin in the game', any weakness in the share price is felt not just by the investors but also by management. Hence, interests are closer aligned, and there's few better signals to get an investor's fists pumping than seeing a Director dip his/her hand in their pocket to hoover up some stock. </div>
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Usually this simple reasoning is valid. Usually. </div>
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Aside from the example of Connaught in the link above, more recent examples of where this reasoning has gone wrong include:</div>
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</div>
<ul>
<li style="text-align: justify;">Rob Terry, the former Chairman of Quindell (now Watchstone Group Plc WTG LN) and his use of the services of Equities First Holdings (EFH); and </li>
<li style="text-align: justify;">Konstantinos Papadimitrako, the former CEO to the fraud, Globo Plc (see concerns raised <a href="http://lordshipstrading.blogspot.co.uk/search/label/Globo" target="_blank"><span style="color: cyan;">here</span></a>). </li>
</ul>
<div>
<div style="text-align: justify;">
In Rob Terry's case, he initially led market participants to believe that he'd pledged some of his Quindell stock as collateral to an outfit called Equities First Holdings (EFH) in exchange for cash that he then intended to use to buy further Quindell shares. Most of Quindell's shareholders rejoiced at this gearing up. However, in the event, while Mr Terry bought a few shares, he bought nowhere near as much in value as the cash amount he received when pledging his stock for the loan. Mr Terry then withdrew from any further dealings with EFH, kept the majority of the cash from the pledging of his stock, and as soon as he stepped down from Quindell's board, he sold a load more stock into the market. </div>
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In the example of Papadimitrako, he merely dumped as much of his c. 18% stake in Globo as was possible in the months leading up to Globo's bankruptcy. This selling was concealed from Globo's hapless shareholders as Papadimitrako simply didn't report his selling until the days after he came clean on the falsification of Globo's financials. All told, Papadimitrako probably pocketed at least £12 Million through selling stock and not declaring it until it was too late. </div>
</div>
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There are other examples, but in each case of the three given above, Connaught, Quindell, and Globo, despite flags being raised well in advance of each company's downfall, longs were seemingly always comforted by the management's 'skin in the game'.</div>
</div>
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</div>
<h3 style="text-align: justify;">
Purchases by Wirecard's Management</h3>
<div>
<div style="text-align: justify;">
According to Bloomberg, through his German company, MB Beteiligungsgesellschaft mbH (MB B), Markus Braun, Wirecard's CEO, is Wirecard's third largest shareholder. Bloomberg shows that MB B holds 7% of Wirecard's stock at the latest count, not far behind the institutions, Jupiter Investment Management and Alken Asset Management; the No. 1 and No. 2 shareholders respectively. The other major holdings can be seen in the table below: </div>
</div>
<div>
<div style="text-align: justify;">
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</div>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLQg0XsS8ttNCVQ68Shd9AijoyIzXiGlz_afvzue-MJLsM2O4rzcpr_6EdtPOfPM428ssA6t10q5kGbQkV4ljZ5dLoYjKY4B_EmKyHQ1Krrs-apV_MlWqCcx57imkEVE4eimZ8nW0jhas/s1600/Top+18+Holdings.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLQg0XsS8ttNCVQ68Shd9AijoyIzXiGlz_afvzue-MJLsM2O4rzcpr_6EdtPOfPM428ssA6t10q5kGbQkV4ljZ5dLoYjKY4B_EmKyHQ1Krrs-apV_MlWqCcx57imkEVE4eimZ8nW0jhas/s400/Top+18+Holdings.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Major holdings in Wirecard AG<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div>
<div style="text-align: justify;">
Bloomberg also has a feature which shows the timing of Markus Braun's sales and purchases through his German company, MB B. The data goes back to at least mid 2008. Red is sales, green represents purchases. This can be seen in graphical form below:</div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLYP_KehMDZEo5k5gyyhWNDf9AQQizFbJgWtoMKbK_laODjAfJQ0SgyM8IodpW_lC258QZXUAQtDum9yE5st2Q2dBzZwe6NbDXwRSRD1kHnLai9X_3m_NeWEg6UwzvXGV_tPDbWkczMus/s1600/MB+B+graph+of+sales+purchases.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="251" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLYP_KehMDZEo5k5gyyhWNDf9AQQizFbJgWtoMKbK_laODjAfJQ0SgyM8IodpW_lC258QZXUAQtDum9yE5st2Q2dBzZwe6NbDXwRSRD1kHnLai9X_3m_NeWEg6UwzvXGV_tPDbWkczMus/s400/MB+B+graph+of+sales+purchases.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Sales and purchases by MB Beteiligungsgesellschaft mbH (MB B - Markus Braun's German company)<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div>
<div style="text-align: justify;">
The timing, volume and closing price on the date of transaction of those MB B sales and purchases is shown by Bloomberg in tabular form below:</div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbzmBJWM37pzX2FtzwXb-tD3qZ__-x4c-b85aBMFKaxWl9IoHLdfwpOejNLZb0rMqEwhgvXQjqWq2c-v_aqvUAmrjpIoJWXu5WmcxtALzJZJDZ1xArIZUcV3QOabF74W33JFksKzZNsr4/s1600/MB+table+of+sales+purchases.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="262" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbzmBJWM37pzX2FtzwXb-tD3qZ__-x4c-b85aBMFKaxWl9IoHLdfwpOejNLZb0rMqEwhgvXQjqWq2c-v_aqvUAmrjpIoJWXu5WmcxtALzJZJDZ1xArIZUcV3QOabF74W33JFksKzZNsr4/s400/MB+table+of+sales+purchases.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Sales and purchases by MB Beteiligungsgesellschaft mbH (MB B - Markus Braun's German company)<br />
<i><span style="font-size: x-small;">Source: Bloomberg</span></i></td></tr>
</tbody></table>
<div>
<div style="text-align: justify;">
This information makes for some interesting number crunching. Word of warning, I'm assuming Bloomberg data is an accurate source and also that I've not made any inadvertent errors in my maths, so please do double check with your own Panasonic scientific calculators. </div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
Ok. Here goes ...</div>
<div style="text-align: justify;">
<br /></div>
<h3 style="text-align: justify;">
The Number Crunching</h3>
</div>
<div>
<div style="text-align: justify;">
On my maths using Bloomberg's data, since July 2008, Markus Braun has purchased 1,365,000 shares in Wirecard through his German company, MB B. </div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
Again on my maths using Bloomberg's data, since July 2008, Markus Braun has sold 1,414,050 shares in Wirecard through his German company MB B. </div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
However, with the exception of the 50,000 shares and a further 150,000 shares, which MB B acquired in 2008, the remaining 1,165,000 were purchased <i>after</i> MB B sold 1,414,050 shares in 2012.</div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
At the closing prices listed by Bloomberg in the table above (which does not necessarily mean the actual prices realized <i>but</i> might be a ball park figure):</div>
</div>
<div>
<ul>
<li style="text-align: justify;">The purchases in 2008 would have cost MB B, c. €1 Million. This is by no means small change. </li>
<li style="text-align: justify;">The subsequent sales in 2012 would have brought to MB B, proceeds of c. €24.2 Million. A material win. </li>
<li style="text-align: justify;">The subsequent purchases from 2015 onward, would have cost MB B, c. €45.4 Million. A significant outlay. </li>
</ul>
<div style="text-align: justify;">
Now, of course there is some rounding error here and there is no guarantee that sales and purchase proceeds and costs would be made exactly at the closing prices listed above. But ball park figure wise, it would seem possible that MB B has hauled in c. €24.2 Million in share sale proceeds and spent c. €46.4 Million in purchasing shares in Wirecard. A net expenditure of c. €22.1 Million on Wirecard stock by MB B since 2008. Wirecard's shareholders must surely be pumping their fists at the results of that number crunching. </div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
So what is the source of that net c. €22.1 Million spent on Wirecard shares?</div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
Perhaps Markus Braun is very well paid? </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
According to Wirecard's 2015 annual report, Markus Braun received total remuneration payments (including benefits) of c. €2.4 Million (2014: c. €1.8 Million). </div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
According to Bloomberg's data and on the same basis as used above, MB B spent c. €26.6 Million on Wirecard share purchases in 2016, and c. €18.8 Million on Wirecard share purchases in 2015. </div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
So even though MB B hauled in c. €24.2 Million in proceeds from share sales in 2012, it would appear that MB B's net purchases of c. €22.1 Million dwarfs Markus Braun's annual pay. </div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
Perhaps there's another source?</div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
It would seem that the annual balance sheets for Markus Braun's German company, MB Beteiligungsgesellschaft mbH (MB B) are filed at the German Company Register: <a href="http://www.bundesanzeiger.de/" target="_blank"><span style="color: cyan;">www.bundesanzeiger.de</span></a></div>
</div>
<div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Unfortunately, the most recently available balance sheet for MB B is as of 31 December 2014. Nonetheless, this bears what some may find to be interesting information. Here is that balance sheet in German - and then a google translation (which I have assumed is accurate) into English - below:</div>
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<div class="separator" style="clear: both; text-align: center;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizaY-pCees-GUrQWW6hXv1dThsHfbLvBPD2k5MvCSV6cc1X_l6gS_8XNCeJk-j0THhZrYQZokVupNQwhLvCmaRUfwNJN-9vtUMeDOUdOB61ylKyPF0zS7Cwhqt4xLakOIzJLSbKyt_1Kg/s1600/MB+B+2014+balance+sheet.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="313" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizaY-pCees-GUrQWW6hXv1dThsHfbLvBPD2k5MvCSV6cc1X_l6gS_8XNCeJk-j0THhZrYQZokVupNQwhLvCmaRUfwNJN-9vtUMeDOUdOB61ylKyPF0zS7Cwhqt4xLakOIzJLSbKyt_1Kg/s400/MB+B+2014+balance+sheet.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014<br />
<i>Source: www.bundesanzeiger.de</i></td></tr>
</tbody></table>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlOkNvDGTpY7uQeIZemRjWwRp8u9TuNgMLMSBMyTLrmaQavTxD0hCZg84QcnXXXfcHEmTiHcsVVc7EaiKrmvAWaFat89nNlRnxvwuq9lSv_NkiLGEvBMQaOF248_DdGTjE7QWbEVty80U/s1600/MB+B+2014+balance+sheet+English.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="305" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlOkNvDGTpY7uQeIZemRjWwRp8u9TuNgMLMSBMyTLrmaQavTxD0hCZg84QcnXXXfcHEmTiHcsVVc7EaiKrmvAWaFat89nNlRnxvwuq9lSv_NkiLGEvBMQaOF248_DdGTjE7QWbEVty80U/s400/MB+B+2014+balance+sheet+English.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014 - Google translation into English<br />
<i><span style="font-size: x-small;">Source: www.bundesanzeiger.de</span></i></td></tr>
</tbody></table>
<div style="text-align: justify;">
According to the MB B filings, as of 31 December 2014, the company held:</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">c. €31.9 Million in financial assets, up from c. €7.0 Million in 2013. It may be worth noting that after the sale of 1,414,050 shares in 2012, that according to data on Bloomberg, the first of MB B's share re-purchases didn't occur until May 2015. This entry may possibly represent MB B's other holdings of Wirecard stock at the time, although one would have thought the market value to be higher than c. €31.9 Million. </li>
<li style="text-align: justify;">c. €28.9 Million in receivables and other assets, up from c. €22.7 Million in 2013. </li>
<li style="text-align: justify;">c. €0.7 Million in cash and cash equivalents, down from c. €7.3 Million in 2013. </li>
<li style="text-align: justify;">c. €25.1 <u><b>Million</b></u> in liabilities, up from c. €31 <u><b>Thousand</b></u> in 2013. </li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Further down the balance sheet of MB B, there are some notes corresponding to the balance sheet items. Here are the notes in German - and then a Google translation into English (which I have assumed is accurate) - below:</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-ocTkM5cLSFI12Dm6jvy5wPXQgS40mSi6VNr5n-1S5wq-u_x-pgN_J7dsFZked8QzudP3Rgnw_DrDKZSr97PIz8pcm53xtOPnUYZK4Z87RdagI-pLS23-CKqJSZcXggO18SF5CpshiWs/s1600/MB+B+receivables+2014.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="162" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-ocTkM5cLSFI12Dm6jvy5wPXQgS40mSi6VNr5n-1S5wq-u_x-pgN_J7dsFZked8QzudP3Rgnw_DrDKZSr97PIz8pcm53xtOPnUYZK4Z87RdagI-pLS23-CKqJSZcXggO18SF5CpshiWs/s400/MB+B+receivables+2014.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Notes to the balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014<br />
<i style="font-size: 12.8px;"><span style="font-size: x-small;">Source: www.bundesanzeiger.de</span></i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQJM2hj0avkAAn1aWxfMYYh5m1a5lW8ypB_xQ0GHwvd-BPT-kz0ppaNplCR8cFYm4VOrJdXnnphtaaADmZBNaDH5UkquTVt9RM-4-O19ZH6TBq-MBsXul7EkeYEWyEY9W22HEMs0zJid4/s1600/MB+B+receivables+2014+English.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="143" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQJM2hj0avkAAn1aWxfMYYh5m1a5lW8ypB_xQ0GHwvd-BPT-kz0ppaNplCR8cFYm4VOrJdXnnphtaaADmZBNaDH5UkquTVt9RM-4-O19ZH6TBq-MBsXul7EkeYEWyEY9W22HEMs0zJid4/s400/MB+B+receivables+2014+English.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Notes to the balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014 - Google translation into English<br />
<i style="font-size: 12.8px;"><span style="font-size: x-small;">Source: www.bundesanzeiger.de</span></i></td></tr>
</tbody></table>
<div style="text-align: justify;">
As shown above, these notes appear to show that as of 31 December 2014, MB B held receivables due from its shareholders, which presumably is Markus Braun, of c. €28.4 Million.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The notes also appear to re-highlight that MB B had c. €25.1 Million in liabilities.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Unfortunately there is no further information on the balance sheet items so it is not possible to conclude:</div>
<ol>
<li style="text-align: justify;">Why Markus Braun appeared to owe MB B c. €28.4 Million in 2014, nor what it related to?</li>
<li style="text-align: justify;">If the c. €25.1 Million was a debt item, and if so, <b><u>WHO</u></b> had MB B borrowed the c. €25.1 Million from and was any security provided had it been a debt?</li>
</ol>
<div style="text-align: justify;">
Although there is scant detail, one explanation - from the notes to the balance sheet - may be that MB B borrowed c. €25.1 Million from an unknown party and has sent some or all of the monies and more to Markus Braun. There are of course alternative explanations as to the funding of Markus Braun's share purchases. For example, he may simply be incredibly rich or there may be tax advantages to this arrangement. But whether this answers why Markus Braun possibly owes MB B the monies he did in 2014 and who MB B possibly borrowed from in 2014 is unclear. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<b><span style="color: red;">And another thing</span></b></div>
<div style="text-align: justify;">
As far as I can tell, Markus Braun is not a member of the Board of Management or Supervisory Board of Wirecard Bank. In light of the above, I found that interesting. </div>
</div>
<div>
<br /></div>
<div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUhecCNsEhiGh6g2L_S30Lkt7qi-HrhlyvfEEvsQ1ry9yVWZo8EBJYXMFrE_Neq4fpcvG9pkGOVD5afvCrDGGhHnT8fUFTpjiibdb6ogcOrD5uSfvbbMyawlUby1q5OurOdyzO3XPMGu8/s1600/Wirecard+Bank+board.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="157" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUhecCNsEhiGh6g2L_S30Lkt7qi-HrhlyvfEEvsQ1ry9yVWZo8EBJYXMFrE_Neq4fpcvG9pkGOVD5afvCrDGGhHnT8fUFTpjiibdb6ogcOrD5uSfvbbMyawlUby1q5OurOdyzO3XPMGu8/s400/Wirecard+Bank+board.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Wirecard Bank - Board of Management and Supervisory Board<br /><i>Source: www.bundesanzeiger.de</i></span></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZplsBtyqpaDGDHxjJG8T7uqRo8trsIEHl6vIoMAUbgF8VchZC_BdbglbVzxI07fj5Fw1c0LBZGSY2DzgvVrDVjdrz0OLhpcGPvz6ArEw9dCIKI6n7S4-upt5LhokBmpPrnnv9Xknxgcg/s1600/Wirecard+Bank+board+English.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="153" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZplsBtyqpaDGDHxjJG8T7uqRo8trsIEHl6vIoMAUbgF8VchZC_BdbglbVzxI07fj5Fw1c0LBZGSY2DzgvVrDVjdrz0OLhpcGPvz6ArEw9dCIKI6n7S4-upt5LhokBmpPrnnv9Xknxgcg/s400/Wirecard+Bank+board+English.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Wirecard Bank - Board of Management and Supervisory Board - Google translation into English</span><br />
<i><span style="font-size: x-small;">Source: www.bundesanzeiger.de</span></i></td></tr>
</tbody></table>
<div style="text-align: justify;">
I am short Wirecard.</div>
<br /></div>
<div>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
</div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com62tag:blogger.com,1999:blog-9008707982090470413.post-82950291634237855232016-09-19T02:30:00.004-07:002016-09-19T02:30:45.553-07:00Mitie (MTO) ... yet another "one-off"<div style="text-align: right;">
Monday 19th September 2016</div>
<br />
<div style="text-align: justify;">
Palm to forehead (Thwack!) time for holders of Mitie (MTO, mkt cap £742m) this morning. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The group has announced a profit warning where: </div>
<blockquote class="tr_bq" style="text-align: justify;">
<span style="color: #999999;">"Operating profit for the full year is now expected to be materially below management's previous expectations as a result of a continuation of the pressures experienced in the first half and further one-off costs of organisational change associated with our cost efficiency programmes, which are expected to total up to £10m in the year."</span></blockquote>
<div style="text-align: justify;">
"further one-off costs" ... hmm. Doesn't the fact that they are labelled "further" kind of suggest they may no longer be "one-off"?</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
In fact, Mitie has a long history of so-called "one-off" or "re-structuring" associated costs. On my maths, these "other items" together with restructuring, acquisition related and exit costs, have cumulatively totaled c. £216m since 2011. Make that c. £226m as of this morning's update. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
However, I fear there will be yet, <i>further</i>, "one-off" costs to come. I continue to believe that Mitie's P&L has been writing profits its balance sheet can't cash. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Mitie's amounts recoverable on contracts and other trade receivables classed as non-current assets, continued to pile up in the last accounts. Now standing at near £90m from £0 in 2010. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjKRtZZe6TinO1mDFcnIbTC0jC1KmH_bq_hp6WFa2IyZSrLi_vokh4n79619t5D5Utj0gAkLBtAG4nz8dzpfQI-Am3605UI8GdvjfahF6fviXKkZwoS-xYJaZXoGAL_YPSjCbJ8YLEB1Y/s1600/MTO+L-T+2016.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjKRtZZe6TinO1mDFcnIbTC0jC1KmH_bq_hp6WFa2IyZSrLi_vokh4n79619t5D5Utj0gAkLBtAG4nz8dzpfQI-Am3605UI8GdvjfahF6fviXKkZwoS-xYJaZXoGAL_YPSjCbJ8YLEB1Y/s400/MTO+L-T+2016.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Mitie amounts recoverable on contracts and other trade receivables classed as non-current assets, £m<br /><i>Source: Mitie annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdDbwIuW53bLoMIZhJNDoVp9hyphenhyphenkhq5BzAV_fOg1PCeAO7vHZAyokBMysrkziV8lqs2jXor0TKepHML3UZB2faHR0DvsM9EXErmHc4nTX_TyKMyOmn85L8Wy5EAuLehv18dQzRQepHaLLU/s1600/MTO+price+Sep+2016.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="275" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdDbwIuW53bLoMIZhJNDoVp9hyphenhyphenkhq5BzAV_fOg1PCeAO7vHZAyokBMysrkziV8lqs2jXor0TKepHML3UZB2faHR0DvsM9EXErmHc4nTX_TyKMyOmn85L8Wy5EAuLehv18dQzRQepHaLLU/s400/MTO+price+Sep+2016.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Mitie share price</td></tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer: The information, discussions
or topics referred to on this blog should in no way be considered “advice” to
buy or sell anything. The information which may be referred to is freely
available in the public domain and where required the source of information is
referenced to for verification. While every effort has been made to ensure the
veracity of any information contained within this blog, the author accepts no
responsibility for the accuracy of any information contained within this blog or
for the sources of information which may be referred to. Readers are
responsible for their own actions and interpretation of the information
contained within this blog. </span><o:p></o:p></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com2tag:blogger.com,1999:blog-9008707982090470413.post-74556958803892398182016-07-25T07:41:00.000-07:002016-07-25T07:41:12.165-07:00Rocket Internet (RKET GY) ... And So It Goes<div style="text-align: justify;">
<div style="text-align: right;">
Monday 25th July 2016</div>
</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Groupon (GRPN US, mkt cap $2.2bn) acquired CityDeal Europe GmbH in May 2010. CityDeal was owned and founded by Oliver Samwer, Marc Samwer, and Alexander Samwer; the Samwer brothers. They are also the founders of Rocket Internet (RKET GY, mkt cap €2.9bn). CityDeal was effectively a replica of Groupon, although principally focused on the German market.<br />
<blockquote class="tr_bq">
<span style="color: #999999;">We began our international operations in May 2010 with the acquisition of CityDeal Europe GmbH, or CityDeal, which was founded by Oliver Samwer and Marc Samwer. Since the CityDeal acquisition, Messrs. Samwer have served as consultants and been extensively involved in the development and operations of our International segment. </span></blockquote>
<blockquote class="tr_bq" style="text-align: right;">
<span style="color: #999999;"><i><span style="font-size: x-small;">Source: Groupon 2012 10-K filing</span></i> </span></blockquote>
GRPN's 2012 10-K filing suggests that it paid up to $204 million for CityDeal in May 2010, five months after the business was launched in January 2010. Yes months! <br />
<blockquote class="tr_bq">
<span style="color: #999999;"><b>Acquisition‑Related</b><br />In May 2010, we acquired CityDeal, a European‑based collective buying power business launched in January 2010 that provided daily deals and online marketing services substantially similar to the Company. As part of the overall consideration paid, we were obligated to issue additional shares of our common stock in December 2010 due to the achievement of financial and performance earn-out targets. We recorded a liability on our consolidated balance sheet as of the original acquisition date for this consideration and subsequently remeasured the liability on a periodic basis until final settlement. As a result of this remeasurement, we recorded a total charge of $204.2 million in acquisition‑related expenses in 2010, which was partially offset by other nominal acquisition‑related items.</span></blockquote>
</div>
<div style="text-align: justify;">
<blockquote class="tr_bq" style="text-align: right;">
<i><span style="color: #999999; font-size: x-small;">Source: Groupon 2012 10-K filing</span></i></blockquote>
GRPN has been something of a disappointment. Having floated at around $20 a share in late 2011, its share price is now some 82% lower at $3.76/shr. Whether the CityDeal acquisition created value or destroyed value for GRPN is uncertain. What is more clear cut is the destruction brought about by the other business which the Samwer brothers sold to GRPN; E-Commerce King Limited.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<h3>
E-Commerce King Limited</h3>
</div>
<div style="text-align: justify;">
<br />
According to GRPN's 2012 10-K filing, in January 2011, GRPN acquired 40% of the ordinary share capital of E-Commerce King Limited in exchange for $4.0 Million.<br />
<blockquote class="tr_bq">
<span style="color: #999999;"><b>Equity Investment in E-Commerce King Limited</b><br />In January 2011, the Company acquired 40.0% of the ordinary shares of E-Commerce King Limited (“E-Commerce”), a company organized under the laws of the British Virgin Islands, in exchange for $4.0 million. The Company entered into the joint venture along with Rocket Asia GmbH & Co. KG (“Rocket Asia”), an entity controlled by former CityDeal shareholders Oliver Samwer, Marc Samwer and Alexander Samwer (the “Samwers”). Rocket Asia acquired 10.0% of the ordinary shares in E-Commerce. E-Commerce subsequently established a wholly-owned foreign enterprise that created a domestic operating company headquartered in Beijing, China (“GaoPeng.com”), which operates a group-buying site offering discounts for products and services to individual consumers and businesses via internet websites and social and interactive media. GaoPeng.com began offering daily deals in March 2011 in Beijing and Shanghai with expansion to other major cities in China to follow.</span></blockquote>
<blockquote class="tr_bq" style="text-align: right;">
<i><span style="color: #999999; font-size: x-small;">Source: Groupon 2012 10-K filing</span></i></blockquote>
This would suggest a $10 Million valuation for the entire issued ordinary share capital. GRPN's stake in E-Commerce King, was with a joint venture with Rocket Asia GmbH & Co. KG, which was controlled by the Samwer brothers. Rocket Asia acquired 10% of the ordinary share capital in E-Commerce King.<br />
<br />
GRPN went on to highlight that around six months later, GRPN acquired a further stake in E-Commerce King, purchasing its increased stake in E-Commerce King from the Samwer brothers', Rocket Asia, for $45.2 Million. GRPN also injected a further $26.7 Million into the E-Commerce business during the same year.<br />
<blockquote class="tr_bq">
<span style="color: #999999;">On July 31, 2011, the Company entered into an agreement to purchase additional interests in E-Commerce for a purchase price of $45.2 million from Rocket Asia consisting of 2,908,856 shares of non-voting common stock. See Note 15 “ Related Parties ”. The investment increased the Company's ownership from 40.0% to 49.0%. In addition, the Company made various cash investments for an aggregate amount of $26.7 million in the year ended December 31, 2011. At the same time, the remaining investors made additional proportionate investments that resulted in no change to the Company's ownership percentage in E-Commerce.</span></blockquote>
<blockquote class="tr_bq" style="text-align: right;">
<i><span style="color: #999999; font-size: x-small;">Source: Groupon 2012 10-K filing</span></i></blockquote>
GRPN's stake rose from 40% to 49%, suggesting that the $45.2 Million purchase valued E-Commerce King at c. $502 Million. That's an impressive 50x increase in valuation in a matter of six months. Although somehow the remaining investors made proportionate investments which resulted in no change to GRPN's ownership percentage in E-Commerce King. <br />
<br />
Incidentally, E-Commerce King appears to have racked up losses of $26.5 Million during its first year of trading.<br />
<blockquote class="tr_bq">
<span style="color: #999999;">The Company recorded its share of the loss of E-Commerce in the amount of $26.5 million within “Equity-method investment activity, net of tax” in the consolidated statement of operations for the year ended December 31, 2011.</span></blockquote>
<blockquote class="tr_bq" style="text-align: right;">
<span style="color: #999999; font-size: x-small;"><i>Source: Groupon 2012 10-K filing</i></span></blockquote>
A few observations:<br />
<br />
<ul>
<li>Incredible uplift in valuations in short order. </li>
<li>As astonishing losses in short order. </li>
<li>The Samwer brothers didn't stick around. </li>
</ul>
<br />
<h3>
Skip forward a year</h3>
<br />
During 2011 and 2012, GRPN made additional cash investments into E-Commerce King of $32.9 Million, increasing its stake to 49.8% along the way. Then in June 2012, E-Commerce King was absorbed by Life Media Limited (F-tuan). In return for GRPN's 49.8% stake in E-Commerce King and a further $25 Million in cash, GRPN received a 19% interest in F-tuan.<br />
<blockquote class="tr_bq">
<span style="color: #999999;">In June 2012, Life Media Limited ("F-tuan"), an exempted company incorporated under the laws of the Cayman Islands with operations in China, acquired E-Commerce. In exchange for its 49.8% interest in E-Commerce and an additional $25.0 million of cash consideration, the Company received a 19% interest in F-tuan in the form of common and Series E preferred shares. The Company paid $5.0 million of the cash consideration on June 25, 2012 and the remaining amount was paid on July 2, 2012.</span></blockquote>
<blockquote class="tr_bq" style="text-align: right;">
<span style="color: #999999; font-size: x-small;"><i>Source: Groupon 2013 10-K filing</i></span></blockquote>
However, GRPN's stake in E-Commerce King was seemingly valued at $128.1 Million when it was transferred to the new entity, F-tuan. Then this value was impaired by $50.6 Million to $77.5 Million by December 31, 2012. This was c. 85% lower than the heady times when it bought an additional 9% for $45.2 Million from the Samwer brothers at an implied valuation of c. $502 Million, just 18 months earlier. <br />
<blockquote class="tr_bq">
<span style="color: #999999;"><b>Cost Method Investment in Life Media Limited (F-tuan)</b><br />The investment in F-tuan is accounted for using the cost method of accounting because the Company does not have the ability to exercise significant influence. Accordingly, the investment is adjusted only for other-than-temporary declines in fair value, certain distributions and additional investments. The $77.5 million carrying amount of the investment represents the $128.1 million fair value on the date the Company obtained it less the $50.6 million impairment discussed below. The estimated fair value of the investment as of December 31, 2012 was $77.5 million.</span></blockquote>
<blockquote class="tr_bq" style="text-align: right;">
<span style="color: #999999; font-size: x-small;"><i>Source: Groupon 2013 10-K filing</i></span></blockquote>
<h3>
Skip forward another year</h3>
<br />
By 2013, GRPN's full investment in F-tuan was written down to ZERO!<br />
<blockquote class="tr_bq">
<span style="color: #999999;"><b>Investments in E-Commerce and Life Media (F-Tuan)</b><br />In June 2012, Life Media Limited ("F-tuan"), an entity with operations in China, acquired the Company's 49.8% interest in E-Commerce King Limited ("E-Commerce"), an entity with operations in China. In exchange for its interest in E-Commerce and an additional $25.0 million of cash consideration, the Company received a 19.1% interest in F-tuan in the form of common and Series E preferred shares. The Company recognized a non-operating gain of $56.0 million as a result of the transaction, which is included within "Other expense, net" on the consolidated statement of operations for the year ended December 31, 2012. The gain represented the excess of the fair value of the Company's investments in F-tuan over the carrying value of its E-Commerce investment as of the date of the transaction and the $25.0 million of cash consideration.</span> </blockquote>
<blockquote class="tr_bq">
<span style="color: #999999;">In August 2013, the Company entered into an exchange transaction with F-tuan whereby it received newly issued shares of Series F preferred stock in exchange for all shares of F-tuan common stock previously held by the Company and $8.0 million of cash consideration, which was paid in two installments of $6.5 million and $1.5 million in August and October 2013, respectively. The transaction was recorded at cost. The Company’s investments in F-tuan following this transaction are in the form of Series E and Series F preferred shares. Those preferred shares rank pari passu with certain other classes of F-tuan’s outstanding preferred stock and have an aggregate liquidation preference of $85.5 million. The Company’s voting interest in F-tuan remained 19.1% after the transaction.</span> </blockquote>
<blockquote class="tr_bq">
<span style="color: #999999;">The Company's investments in the Series E and Series F preferred shares of F-tuan are classified as available-for-sale securities because the investee's Memorandum of Association provides for redemption of the preferred shares at the Company's option beginning in October 2017. The Company's investment in the common shares of F-tuan, which were held prior to the August 2013 exchange transaction, was accounted for using the cost method of accounting because the Company did not have the ability to exercise significant influence over the operating and financial policies of the investee. </span><span style="background-color: yellow;"><span style="color: #444444;">As discussed below, the Company's investments in F-tuan were written down to zero through an other-than-temporary impairment charge as of December 31, 2013, and continue to have an estimated fair value of zero as of December 31, 2014.</span></span></blockquote>
<blockquote class="tr_bq" style="text-align: right;">
<i><span style="color: #999999; font-size: x-small;">Source: Groupon 2014 10-K filing</span></i></blockquote>
That's some ride from a $10 Million valuation in January 2011, to an implied $502 Million valuation six months later, and all the way back down to ZERO within a few years.<br />
<br />
This is precisely what I expect will happen to almost if not all of Rocket's "proven winners". And for that reason I am short Rocket.<br />
<br />
Now ... how about those Kinnevik write downs, huh?<br />
Hint: <a href="http://ftalphaville.ft.com/marketslive/2016-07-22/" target="_blank"><span style="color: cyan;">FT Alphaville Markets Live: Friday, 22nd July, 2016</span></a><br />
<br />
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Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com19tag:blogger.com,1999:blog-9008707982090470413.post-38950654430643288302015-11-17T02:06:00.002-08:002015-11-17T02:06:33.597-08:00Wirecard (WDI GY) ... GI Retail and a rapidly shrinking market share<div style="text-align: right;">
Tuesday 17th November 2015</div>
<div>
<div style="text-align: justify;">
<br /></div>
</div>
<div>
<div style="text-align: justify;">
Were one to buy or invest into a business, paying up to say €340 million, or c. 49 x run rate EBITDA, then on that multiple there's a few criteria of investment one may look to tick off. In this list would be a fast growing underlying market. One would also seek the presence of a high barrier(s) to entry or, absent this, at least some sort of first mover advantage. There's no denying that the Indian payments market is growing rapidly. </div>
<div style="text-align: justify;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhnQ1GUETn01TOfX60pR9uQoVTIfBAXAfI5zKTvTalluhfQPZbiECavxT1HqJfSlWnocmDYKh9BOrot-dggkY77TE3ggEOEV7DBdZUv9tyR1CsBS3Ed2rfvsMZDe-Vmurd6RFJHKWif7vg/s1600/Financials.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhnQ1GUETn01TOfX60pR9uQoVTIfBAXAfI5zKTvTalluhfQPZbiECavxT1HqJfSlWnocmDYKh9BOrot-dggkY77TE3ggEOEV7DBdZUv9tyR1CsBS3Ed2rfvsMZDe-Vmurd6RFJHKWif7vg/s400/Financials.jpg" width="323" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Financials of Wirecard's acquisition of GI Retail Group<br />
<i>Source: Wirecard</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: justify;">
<span style="color: red;">Data, data, payments data</span></h2>
<div style="text-align: justify;">
The World's major central banks generally provide what seems like an endless amount of economic and financial data. The Reserve Bank of India (RBI) is no exception.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Below is the section from the RBI's November 2015 bulletin pertaining to transaction values and volumes by a range of payment and settlement systems. This data is published monthly and goes back many, many years. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRoNyeSDtR5OZVyjNzpoMSX0pjCWcYpC5xu3SXUfFpBcxU7EtdqnHDCeDUglxfLBl1mkpQHwJBuglXiBYIxP7BNqtv2mBZb9FVbUADFP1okcz0BaicN5oIdQ8IBAYqtL-yealuedcY-mc/s1600/RBI+payments+data.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRoNyeSDtR5OZVyjNzpoMSX0pjCWcYpC5xu3SXUfFpBcxU7EtdqnHDCeDUglxfLBl1mkpQHwJBuglXiBYIxP7BNqtv2mBZb9FVbUADFP1okcz0BaicN5oIdQ8IBAYqtL-yealuedcY-mc/s400/RBI+payments+data.png" width="322" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Indian Payment and Settlement Systems data July-September 2015<br />
<i>Source: Reserve Bank of India - November 2015 Bulletin</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
The data can be found at this link <a href="https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/43T06F17579B85C4ECAB9F9EE40043795FC.PDF" target="_blank"><span style="color: cyan;">here</span></a>. </div>
<div style="text-align: justify;">
Historic data can be found <a href="https://www.rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=15939" target="_blank"><span style="color: cyan;">here</span></a>. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The data that is of interest is that found along the Immediate Payment Service and Prepaid Payment Instruments (PPIs) rows. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
This data shows that in September 2015 there were:</div>
<div style="text-align: justify;">
</div>
<ul>
<li>17.7 million Immediate Payment Service transactions.</li>
<li>120.7 billion Indian Rupees worth of Immediate Payment Service transactions.</li>
<li>58.0 million Prepaid Payment Instruments (PPIs) based transactions.</li>
<li>40.8 billion Indian Rupees worth of Prepaid Payment Instruments (PPIs) based transactions.</li>
</ul>
<br />
<div style="text-align: justify;">
At a rate of c. 71 EUR:INR this equates to:</div>
<div style="text-align: justify;">
</div>
<ul>
<li>€1.696 billion worth of Immediate Payment Service transactions.</li>
<li>€0.573 billion worth of Prepaid Payment Instruments (PPIs) based transactions.</li>
<li>€2.269 billion in total.</li>
</ul>
<br />
<div style="text-align: justify;">
Commission fees in the payments space typically range from 1% to 1.5%. Indeed, Suvidhaa's commission rate was reportedly c. 1.37% as highlighted in my prior post: <a href="http://www.lordshipstrading.blogspot.co.uk/2015/11/wirecard-wdi-gy-suvidhaa-vs-gi-retail.html" target="_blank"><span style="color: cyan;">Suvidhaa vs. GI Retail</span></a>.<br />
<br />
Further, Dan McCrum's latest feature, <a href="http://ftalphaville.ft.com/2015/11/12/2144182/rupee-do-what-is-wirecard-buying/" target="_blank"><span style="color: cyan;">Rupee do</span></a>, from his <a href="http://ftalphaville.ft.com/tag/house-of-wirecard/" target="_blank"><span style="color: cyan;">House of Wirecard</span></a> series, shows how GI Retail's Hermes i-Tickets business appeared to earn gross commission of c. €1.6 million on total sales of c. €185 million in the year to 31 March 2014. This is a c. 0.9% rate of commission, which is somewhat lower than the typical 1% to 1.5% range. Hermes' commission was also seemingly principally related to airline and railway ticket bookings and less so to money transfers.<br />
<br />
However, what Wirecard says is that the GI Retail Group as a whole achieved revenue as follows:<br />
<ul>
<li>FY13/14 (31/03) 1,109.2 million INR or €15.8 million in revenue.</li>
<li>FY14/15 (31/03) 2,677.6 million INR or €38.3 million in revenue.</li>
</ul>
<br />
and is projected to achieve<br />
<ul>
<li>FY2015 (31/12) €45 million in revenue.</li>
<li>FY2016 (31/12) €75 million in revenue. </li>
</ul>
<br />
Presumably all this revenue (achieved and projected) is largely related to payments and money remittance. Indeed Wirecard's CEO, Markus Braun says as much:<br />
<blockquote class="tr_bq">
<i><span style="color: #999999;">"Great Indian (GI) Retail Group has been at the forefront of India's dynamic and early-stage e-commerce and money remittance market for many years. Our investment into one of the region's leading payment groups secures us a strong position in one of the world's most rapidly growing electronic payment markets."</span></i></blockquote>
Hence, if commission rates are in the range of 1% to 1.5%, then if we assume GI Retail earns mid-way in this range, receiving 1.25% of total transaction value, then this would imply the following:<br />
<br />
<ul>
<li>FY13/14 (31/03) 1,109.2 million INR or €15.8 million in revenue = c. 88.736 billion INR or €1.264 billion in transaction value.</li>
<li>FY14/15 (31/03) 2,677.6 million INR or €38.3 million in revenue = c. 214.208 billion INR or €3.064 billion in transaction value.</li>
<li>FY2015 (31/12) €45 million in revenue = c. €3.6 billion in transaction value. </li>
<li>FY2016 (31/12) €75 million in revenue = c. €6.0 billion in transaction value. </li>
</ul>
<br />
<h2>
<span style="color: red;">The data goes back a few years</span></h2>
As mentioned above, the RBI Payment and Settlement Systems data goes back some time. Well it goes back to 2013 and a bit before that.<br />
<br />
Here is the Payment and Settlement Systems data from the Reserve Bank of India's May 2014 bulletin: <br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXg8B7zRi-PTmMG1MxvT-PS9uHaxYciXsblj7iln0jNi78_cyj5nbgtwY0QH54etDZp1cYSfMuEetPFpQuDb-0mRdU8PCgVVLR35FkQ9IxK8D2sjRLgUk3vP5ybydncRVdaQm7JkaovfE/s1600/RBI+payments+data+May+2014.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXg8B7zRi-PTmMG1MxvT-PS9uHaxYciXsblj7iln0jNi78_cyj5nbgtwY0QH54etDZp1cYSfMuEetPFpQuDb-0mRdU8PCgVVLR35FkQ9IxK8D2sjRLgUk3vP5ybydncRVdaQm7JkaovfE/s400/RBI+payments+data+May+2014.jpg" width="308" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Indian Payment and Settlement data January-March 2014<br />
<i>Source: Reserve Bank of India - May 2014 Bulletin</i></td></tr>
</tbody></table>
This shows that in the twelve months to March 2014 there were:<br />
<ul style="text-align: start;">
<li>15.3 million Immediate Payment Service transactions.</li>
<li>95.8 billion Indian Rupees worth of Immediate Payment Service transactions.</li>
<li>144.3 million Prepaid Payment Instruments (PPIs) based transactions.</li>
<li>79.05 billion Indian Rupees worth of Prepaid Payment Instruments (PPIs) based transactions.</li>
</ul>
<div style="text-align: justify;">
At a rate of c. 71 EUR:INR this equates to:</div>
<div style="text-align: justify;">
</div>
<ul style="text-align: start;">
<li>€1.349 billion worth of Immediate Payment Service transactions.</li>
<li>€1.113 billion worth of Prepaid Payment Instruments (PPIs) based transactions.</li>
<li>€2.462 billion in total.</li>
</ul>
As highlighted above, Wirecard's claims for GI Retail's FY13/14 (31/03) revenue should imply it was related to c. €1.264 billion in transaction value.<br />
<br />
That would suggest that GI Retail had c. 51.3% share of the combined Immediate Payment Service and Prepaid Payment Instruments transaction business that was up for grabs in the twelve months to March 2014.<br />
<br />
That seems quite a lot.<br />
<br />
Skip forward a year and here is the Payment and Settlement Systems data from the Reserve Bank of India's May 2015 bulletin:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiT62w52j62M92h3DdJUyOYDNliPIYwPRn9gn05OfKjnTiApZ66JNa65OKc7nBKgflxlTMVlvzBkqFfgDAv_-i1gyJ_ehxZyYvAfBrKU6Vw22aNGqictQ9xwkRhc-5u7Nx4ds1sDzzQ40w/s1600/RBI+payments+data+May+2015.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiT62w52j62M92h3DdJUyOYDNliPIYwPRn9gn05OfKjnTiApZ66JNa65OKc7nBKgflxlTMVlvzBkqFfgDAv_-i1gyJ_ehxZyYvAfBrKU6Vw22aNGqictQ9xwkRhc-5u7Nx4ds1sDzzQ40w/s400/RBI+payments+data+May+2015.jpg" width="310" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Indian Payment and Settlement data January-March 2015<br />
<i>Source: Reserve Bank of India - May 2015 Bulletin</i></td></tr>
</tbody></table>
<br />
This shows that in the twelve months to March 2015 there were:<br />
<ul style="text-align: start;">
<li>78.4 million Immediate Payment Service transactions.</li>
<li>581.9 billion Indian Rupees worth of Immediate Payment Service transactions.</li>
<li>314.5 million Prepaid Payment Instruments (PPIs) based transactions.</li>
<li>213.4 billion Indian Rupees worth of Prepaid Payment Instruments (PPIs) based transactions.</li>
</ul>
<div style="text-align: justify;">
At a rate of c. 71 EUR:INR this equates to:</div>
<div style="text-align: justify;">
</div>
<ul style="text-align: start;">
<li>€8.195 billion worth of Immediate Payment Service transactions.</li>
<li>€3.005 billion worth of Prepaid Payment Instruments (PPIs) based transactions.</li>
<li>€11.2 billion in total.</li>
</ul>
As highlighted above, Wirecard's claims for GI Retail's FY14/15 (31/03) revenue should imply it was related to c. €3.064 billion in transaction value.<br />
<br />
That would suggest that GI Retail had c. 27.4% share of the combined Immediate Payment Service and Prepaid Payment Instruments transaction business that was up for grabs in the twelve months to March 2015.<br />
<br />
That seems quite a lot but is down from the c. 51.3% share it appeared to have a year earlier.<br />
<br />
Now, bringing this up to where Wirecard reckons GI Retail will finish the year shows as follows.<br />
<br />
The RBI data indicates that transaction value related to Immediate Payment Service and Prepaid Payment Instruments totaled €16.705 billion during the nine months to September 2015.<br />
<br />
Transaction value has been increasing by an average €123 million per month during 2015. On that basis, total transaction value related to Immediate Payment Service and Prepaid Payment Instruments would be expected to total €24.266 billion<span style="font-size: x-small;">*</span> during the twelve months to December 2015.<br />
<br />
Now Wirecard reckons GI Retail's FY2015 (31/12) revenue will be c. €45 million, which should imply it will relate to c. €3.6 billion in transaction value.<br />
<br />
That would suggest that GI Retail had c. 14.8% share of the combined Immediate Payment Service and Prepaid Payment Instruments transaction business up for grabs in the twelve months to December 2015.<br />
<br />
That still seems high but is down from the c. 27.4% implied to March 2015 and the c. 51.3% implied to March 2014. <br />
<br />
<span style="font-size: x-small;">*Total transaction value in the nine months to September 2015 = €16.705 billion.</span><br />
<span style="font-size: x-small;">Total transaction value in September 2015 = €2.275 billion.</span><br />
<span style="font-size: x-small;">On average total transaction value has increased by €123 million each month in the first nine months of 2015. </span><br />
<span style="font-size: x-small;">Hence, expected total 2015 transaction value = €16.705 billion (9 months to September) + €2.275 billion + €123 million (September + average increase in the month) + €2.275 billion + 2x €123 million (September + 2 x average increase in the month) + €2.275 billion + 3x €123 million (September + 3 x average increase in the month) = €24.266 billion.</span> <br />
<br />
Incidentally, as a corollary, if Wirecard expects GI Retail's revenue to rise to €75 million in 2016, then for GI Retail to maintain (or grow) its implied 2015 market share, then market growth needs to slow to (or fall below) 67%. This is still strong growth but would be a sharp slowdown from 214% growth in 2015 and 351% growth in 2014.<br />
<h2>
<span style="color: red;">And another thing</span></h2>
As Dan McCrum amusingly<span style="font-size: x-small;">^</span> highlights in his latest <a href="http://ftalphaville.ft.com/2015/11/12/2144182/rupee-do-what-is-wirecard-buying/" target="_blank"><span style="color: cyan;">feature</span></a> on Wirecard, Hermes is signed up with India's Yes Bank to provide money transfer services. Now you might think that on the basis of GI Retail's implied market share of c. 51.3% from a few years back, that Hermes/GI Retail was either the only (or one of very few) to be signed up with Yes Bank. You'd be wrong to think that.<br />
<span style="font-size: x-small;">^Look for the section on an unusual headline. </span><br />
<br />
Here is Yes Bank's latest list of Money-Business Correspondents:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPrco7NIGlwvrcemLNtHsLIppLN-WhAveYg-p_idu1rjmRmAU_koQbcBkI-UCdcmCLmWjgmNU43kko7J9oEE5BMstulDbAK-u27_nS0JXgFgoRNLekbCDLuIG7DxtvoS7NPZsw5XYJs90/s1600/Yes+Bank+Nov+2015.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="316" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPrco7NIGlwvrcemLNtHsLIppLN-WhAveYg-p_idu1rjmRmAU_koQbcBkI-UCdcmCLmWjgmNU43kko7J9oEE5BMstulDbAK-u27_nS0JXgFgoRNLekbCDLuIG7DxtvoS7NPZsw5XYJs90/s400/Yes+Bank+Nov+2015.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Yes Bank's list of Money-Business Correspondents<br />
<i>Source: Yes Bank November 2015</i></td></tr>
</tbody></table>
And here is Yes Bank's list of Money- Business Correspondents from August 2013, around the time it would seem (on the basis of above) that Hermes/GI Retail had c. 51.3% of the combined Immediate Payment Service and Prepaid Payment Instruments market.<br />
<br />
It was clearly slim pickings for the other twelve members signed up with Yes Bank. Of course Yes Bank is only one of many retail banks in India.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbDnxKrEviO3H9aLvXb73F6kOlEqVd6q7e9TupOH8YSjTL922bmYJE1gsoupf11HicFZ8Rh6vLsuAjVy1gqnXfLeq764Yzip3-Kvjpr-8Xf3jMO1wnECMHcyCB6Y4ob2R_8mH8p-RmwnM/s1600/YES+Bank+Aug+2013.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="273" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbDnxKrEviO3H9aLvXb73F6kOlEqVd6q7e9TupOH8YSjTL922bmYJE1gsoupf11HicFZ8Rh6vLsuAjVy1gqnXfLeq764Yzip3-Kvjpr-8Xf3jMO1wnECMHcyCB6Y4ob2R_8mH8p-RmwnM/s400/YES+Bank+Aug+2013.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Yes Bank's list of Money-Business Correspondents<br />
<i>Source: Wayback Machine - Yes Bank August 2013</i> </td></tr>
</tbody></table>
<br />
<h2>
<span style="color: red;">Just one more thing</span></h2>
Wirecard highlights that:<br />
<blockquote class="tr_bq">
<i><span style="color: #999999;">"The National Payments Corporation of India (NPCI) ranks GI Technology as number one bank's remitter among 123 members as of 6th October 2015."</span></i></blockquote>
And here is the NPCI's website showing GI Technology with c. 3.7 million subscribed users (1 lakh = 100,000).<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTxZHjaHVtkZlZdOz0bIcB_r7CYqB_tr8p8wEUQUM1RN43qfHN-lfS4HpjP38EVQ2QEz8PIC8n0VhuVLgzOHWrBVRQIlqzV-gQJR_XUqiQMBDOgW3GlrQBL-mwmHTyJOCFmsYvkAUm_Sk/s1600/PPII+November+2015.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="388" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTxZHjaHVtkZlZdOz0bIcB_r7CYqB_tr8p8wEUQUM1RN43qfHN-lfS4HpjP38EVQ2QEz8PIC8n0VhuVLgzOHWrBVRQIlqzV-gQJR_XUqiQMBDOgW3GlrQBL-mwmHTyJOCFmsYvkAUm_Sk/s400/PPII+November+2015.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Prepaid Payments Instrument Issuer subscribed users<br />
<i>Source: National Payments Corporation of India</i></td></tr>
</tbody></table>
Strangely the only other subscribed user data is provided for ITZ Cash Card. One can see why one may reckon that Wirecard views GI Technology as being the number one bank's remitter.<br />
<br />
But this may not have always been the case.<br />
<br />
According to the NPCI, in December 2014, GI Technology had c. 1.4 million subscribed users while Oxigen Services had 50% more or c. 2.1 million subscribed users. <br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5BtaBg1tiwaLB8tisk-Mlwhp5-jNqoTUi7oM5UOP_Q_ZxzLYVflZEKqDD26mp4azxTXfuyTWxwEdCFYVQKv3fkMCqeEz2b0WRpyhOm8qKbEn9RSNdNxmrDDbcfG2XTvdZAp0qG1YkYpE/s1600/PPII+March+2015.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="297" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5BtaBg1tiwaLB8tisk-Mlwhp5-jNqoTUi7oM5UOP_Q_ZxzLYVflZEKqDD26mp4azxTXfuyTWxwEdCFYVQKv3fkMCqeEz2b0WRpyhOm8qKbEn9RSNdNxmrDDbcfG2XTvdZAp0qG1YkYpE/s400/PPII+March+2015.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Prepaid Payments Instrument Issuer subscribed users<br />
<i>Source: Wayback Machine - National Payments Corporation of India December 2014</i></td></tr>
</tbody></table>
And prior to this, in May 2014, GI Technology had c. 0.5 million subscribed users while Oxigen Services had c. 0.9 million subscribed users. These numbers are indeed odd, when at the same time, going on Wirecard's claims for GI Retail revenue and the RBI data, it would appear that GI Retail had c. 51.3% market share.<br />
<br />
<h2>
<span style="color: red;">And finally</span></h2>
Here is the <a href="https://icashcard.in/" target="_blank"><span style="color: cyan;">iCashCard</span></a> website, <i><span style="color: #999999;">"India's number one domestic (Immediate Payment Service - IMPS) remittance instrument"</span></i>:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQoDOf4vUQWphv-cLvH109ZaJjcVb0Q3Yh9pk0dVhgGer3X34XckFcnyza7nC3Uz98CJi48ZwD4ZAnKS9aogaoxuPNEdgPTw152AjoVPICoPyavvW_GceFV5CB7tlWUg-qFER3wAXp-FY/s1600/iCashCard.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="166" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQoDOf4vUQWphv-cLvH109ZaJjcVb0Q3Yh9pk0dVhgGer3X34XckFcnyza7nC3Uz98CJi48ZwD4ZAnKS9aogaoxuPNEdgPTw152AjoVPICoPyavvW_GceFV5CB7tlWUg-qFER3wAXp-FY/s400/iCashCard.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">iCashCard website and click option for Agent Login<br />
<i>Source: www.icashcard.in</i></td></tr>
</tbody></table>
If you click on the "Agent Login" option (highlighted above) it takes you <a href="http://agent.icashcard.in/login" target="_blank"><span style="color: cyan;">here</span></a>:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPFDswx_t4Xh8LkpOjuB1ZIVzADxJv_JwYSbHR-0PfcZCOyBdCla29TFrmnmn0qLrkBhveJ4FI_QyKfG9XPeDDEwUdnOQW2p0QYEjMPVnTXMguylu4nxvFelm75UzcJvq7GHo9fpfQxWo/s1600/iCashCard+Agent+Login.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="250" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPFDswx_t4Xh8LkpOjuB1ZIVzADxJv_JwYSbHR-0PfcZCOyBdCla29TFrmnmn0qLrkBhveJ4FI_QyKfG9XPeDDEwUdnOQW2p0QYEjMPVnTXMguylu4nxvFelm75UzcJvq7GHo9fpfQxWo/s400/iCashCard+Agent+Login.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">iCashCard Agent Login site<br />
<i>Source: http://agent.icashcard.in/login</i></td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
And if you click on the "Want to become retailer click here to apply provide us details. We will reach you shortly" option, it takes you <a href="https://www.getmytrip.com/(S(5hbmsfm3ifvha2ahnhral454))/gmt-enquiry" target="_blank"><span style="color: cyan;">here</span></a>:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHmtdFCQaylpmL4Z-XoZH_vliwulFzHzp7RLrpivxVSdGD8E9auhcj5NWZhScH6_VcyVWhrwFWNKcaaKh7nCUVHdyrLdAAnUo3w5Bg0Sjds5Zcq3_OyveZfoWT_qZhdM1swyP9cDnDjOU/s1600/GetMyTrip.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="305" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHmtdFCQaylpmL4Z-XoZH_vliwulFzHzp7RLrpivxVSdGD8E9auhcj5NWZhScH6_VcyVWhrwFWNKcaaKh7nCUVHdyrLdAAnUo3w5Bg0Sjds5Zcq3_OyveZfoWT_qZhdM1swyP9cDnDjOU/s400/GetMyTrip.jpg" width="400" /></a></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgULx6AwTjvDmZRykmflWAhMFvm_pXuyBm6BAm_CxpUj5w7sH77-Y-hyIaLXaslmMqfLK-DtOXsUxEJB1hUVyqREl4_iCofhk3xcbIr-sVyKdhDuikR-gF9PkHQQcNYcMUqN_WlXqAuiVc/s1600/GetMyTrip2.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="166" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgULx6AwTjvDmZRykmflWAhMFvm_pXuyBm6BAm_CxpUj5w7sH77-Y-hyIaLXaslmMqfLK-DtOXsUxEJB1hUVyqREl4_iCofhk3xcbIr-sVyKdhDuikR-gF9PkHQQcNYcMUqN_WlXqAuiVc/s400/GetMyTrip2.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GetMyTrip application/enquiry form<br />
<i>Source: www.getmytrip.com</i></td></tr>
</tbody></table>
Why does an application to become a retailer for the iCashCard payments business (<i><span style="color: #999999;">"India's number one domestic remittance instrument"</span></i>) take you to the Hermes' travel agency site, Get My Trip? This is altogether very odd.<br />
<br />
I increased my short in Wirecard.<br />
<br />
<span style="line-height: 115%;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></span></div>
</div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com2tag:blogger.com,1999:blog-9008707982090470413.post-69118324988708661382015-11-06T07:46:00.000-08:002015-11-06T07:46:12.166-08:00Atkins (ATK LN) ... as night follows day <div style="text-align: right;">
Friday 6th November 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Coming up to two years ago I sold short in Weir Group (WEIR, mkt cap £2.4bn), at 2,094p/shr.<br />
<a href="http://lordshipstrading.blogspot.co.uk/2014/01/weir-weir-demand-driven-short.html" target="_blank"><span style="color: cyan;">Demand driven short</span></a>. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
I quickly covered the short about a month or so later at around 2,300p/shr. I closed in the midst of a sharp run up in Weir's price, driven by spurious bid speculation and a short squeeze; short interest at the time was 12%. The market then was also fairly unforgiving for shorts, still being juiced by QE, statements of <i>"whatever it takes"</i> and all that.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Weir's shares peaked at 2,848p and loitered above 2,500p through to September 2014. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
It's a pity I didn't review my bearish view on Weir in H2 2014. The shares have since collapsed to 1,136p.<br />
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiAr1ugFQcC6JJHmBX4Ja2tbOr2Q9NKRXX3Bp-p6D_r9VGGNybWqFlrx9OHvmTcs5u3utJibEyH9ppHkK-qu_jqAhzbiCi6XYiOadkEz8_fwJYrTvQ6DBdITpfHFk6_-h2DjACuq14MSY/s1600/WEIR+share+price.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiAr1ugFQcC6JJHmBX4Ja2tbOr2Q9NKRXX3Bp-p6D_r9VGGNybWqFlrx9OHvmTcs5u3utJibEyH9ppHkK-qu_jqAhzbiCi6XYiOadkEz8_fwJYrTvQ6DBdITpfHFk6_-h2DjACuq14MSY/s400/WEIR+share+price.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Weir share price<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<div style="text-align: justify;">
The rationale behind my short was pretty straightforward. For months, Weir's customers had been broadcasting an enormous contraction in their collective capex plans in the years ahead. Hence, it was obvious to me, that as night follows day, that Weir's revenue and margins would come under pressure following that contraction in demand from its principal customers. And yet for some reason, consensus earnings expectations remained absurdly optimistic. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
In early 2014, I'd calculated that Weir's top 13 customers<span style="font-size: x-small;">*</span> accounted for 32% of its revenue and from those customers' capex guidance, they were about to cut their combined annual capex by 14% over the next three years. At the same time, consensus<span style="font-size: x-small;">*</span> estimates projected Weir's revenue to grow 19% over the same period. Go figure!<br />
<span style="font-size: x-small;">*data from Bloomberg</span> </div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYIXYKyMGwdOdLFWLDNodmmLJ9leJ5qtWCpcEW1kMD6ZaIiDzttxlP9ZW48igGIC2Y38lEp3y0EFzpCwLgMjLcCddkLhh_6oFiSnQJZ5adThVLMfxsT3FJAwnX-8Ig172_DOc7tsCBVUM/s1600/WEIR+revenue+evolution.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYIXYKyMGwdOdLFWLDNodmmLJ9leJ5qtWCpcEW1kMD6ZaIiDzttxlP9ZW48igGIC2Y38lEp3y0EFzpCwLgMjLcCddkLhh_6oFiSnQJZ5adThVLMfxsT3FJAwnX-8Ig172_DOc7tsCBVUM/s400/WEIR+revenue+evolution.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Weir consensus revenue growth projections<br />
from January 2014 as compared to current consensus<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-O0wSjcdoPxa2m-6OrB-7D7XY0bU5wL09hEJDqBEGBB_vf38_SpkwL69ZLLOqrmPNdMMPaWegwcRSDUlPUIgwLghk0F_aiSuRglGnnfRB3BtMe7x4ivEBwh2jIuzcOpFyfebrwRd4IW0/s1600/WEIR+EBITDA+margin+evolution.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-O0wSjcdoPxa2m-6OrB-7D7XY0bU5wL09hEJDqBEGBB_vf38_SpkwL69ZLLOqrmPNdMMPaWegwcRSDUlPUIgwLghk0F_aiSuRglGnnfRB3BtMe7x4ivEBwh2jIuzcOpFyfebrwRd4IW0/s400/WEIR+EBITDA+margin+evolution.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Weir consensus EBITDA margin projections<br />
from January 2014 as compared to current consensus<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<h2>
<span style="color: red;">That was then </span></h2>
</div>
<div style="text-align: justify;">
Now I reckon the same bearish argument could be made for Atkins (ATK, mkt cap £1.4bn), the design, engineering and project management consultancy business. <br />
<br />
According to Bloomberg estimates (BBE), Atkin's top 12 quoted customers<span style="font-size: x-small;">^</span> account for 16% of its revenue. Further, BBE suggest that these customers are set to cut their combined annual capex each year by 15% in 2015, 4% in 2016 and a further 2% in 2017. This is a total capex cut of 21% through to 2017 from 2014 levels.<br />
<br />
By comparison, BBE forecasts that Atkins is set to grow its revenues by 5%, 3% and 4% in 2016, 2017 and 2018 respectively (Atkins has a March year end). This is total growth of 13% through to 2018 (March year end) from 2015 levels.<br />
<br />
Further, consensus expects Atkin's EBITDA margin to rapidly increase from 7.7% in 2014, to 9.4% by 2018. <br />
<br />
I find all this very unlikely. So I sold short a few Atkins.<br />
<br />
<span style="font-size: x-small;">^Bloomberg estimate of Atkin's revenue by customer - Airbus (4.3%), Apache (2.0%), Statoil (2.0%), CNOOC (1.6%), Chevron (1.4%), ENI (1.3%), Boeing (0.9%), Royal Dutch (0.9%), Rolls Royce (0.7%), BP (0.6%), National Grid (0.4%), Alstom (0.2%)</span> <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0aRaK67R5we368U9HU1nP3iCzY4xoqoWxGEE3o4j4-7kxISkOgef1xpuA6UnGfufuiMCSC0W_fyuLZOS784b8HLOQKzj5Ca7eff-QGcbYasWRdqlmHV2vJHs5jJgyAOt5457ZMvNIp2o/s1600/Atkins+consensus+vs+capex.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0aRaK67R5we368U9HU1nP3iCzY4xoqoWxGEE3o4j4-7kxISkOgef1xpuA6UnGfufuiMCSC0W_fyuLZOS784b8HLOQKzj5Ca7eff-QGcbYasWRdqlmHV2vJHs5jJgyAOt5457ZMvNIp2o/s400/Atkins+consensus+vs+capex.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins consensus revenue growth and EBITDA margin forecasts<br />
as compared to consensus capex plans by top 12^ (see above) quoted customers<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<br />
Incidentally, Atkins trades on a forward P/E of 12.5x and a forward EV/EBITDA rating of 6.9x when as one can see, historically the shares have traded somewhat lower.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAYly2mLdRhfQaiHvs4D-bP2h6rp3HnR0UWU656dEAS4BZd5zzbBsEiOL4GDTbfRpAg30Hk4ok6vyx5EuVuPQXhduJml2OyqC1fip50hZjWXhyphenhyphenaA2bcvSx3UOCVcvInMYqlJgYlXG4Ang/s1600/Atkins+PE+and+EVEBITDA.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAYly2mLdRhfQaiHvs4D-bP2h6rp3HnR0UWU656dEAS4BZd5zzbBsEiOL4GDTbfRpAg30Hk4ok6vyx5EuVuPQXhduJml2OyqC1fip50hZjWXhyphenhyphenaA2bcvSx3UOCVcvInMYqlJgYlXG4Ang/s400/Atkins+PE+and+EVEBITDA.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins forward P/E and EV/EBITDA rating<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMkXGSXcwFBGR65v_9mU1Z7snPv3QGwWr2sFbHv8ASnzDJaMuq6qJnW5LAE6asd8V1YHoJpi5OQZJAB-ZMeW7aePPcfhZxlkwJv07zXn0GUsNoCkufCcLYpndKpINPpRRxQDvbgpUi0YQ/s1600/Atkins+share+price.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMkXGSXcwFBGR65v_9mU1Z7snPv3QGwWr2sFbHv8ASnzDJaMuq6qJnW5LAE6asd8V1YHoJpi5OQZJAB-ZMeW7aePPcfhZxlkwJv07zXn0GUsNoCkufCcLYpndKpINPpRRxQDvbgpUi0YQ/s400/Atkins+share+price.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins share price<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<h2>
<span style="color: red;">And another thing</span></h2>
As night follows day ... I found the following charts reasonably compelling.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjdhz8ew5psDvDnzMYrukSzXYWrhmeS4ZoG4ROUsxsKLAeF0BBZAWSPxX7c5ph8j8SkTzgQa1a94xQ_bWBqLhHCHz_ys7_7MlamrnQQbsXMbCZ114XpAe57ygWCNhLfz6e3iYVJ6JK5lw/s1600/ATK+vs+APA.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjdhz8ew5psDvDnzMYrukSzXYWrhmeS4ZoG4ROUsxsKLAeF0BBZAWSPxX7c5ph8j8SkTzgQa1a94xQ_bWBqLhHCHz_ys7_7MlamrnQQbsXMbCZ114XpAe57ygWCNhLfz6e3iYVJ6JK5lw/s400/ATK+vs+APA.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins share price as compared to Apache Corp (2.0% of ATK revenue*)<br />
<i>Source: Bloomberg, *Bloomberg SPLC</i> </td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiG3e96C8OANKSKim_3q3TqbYKPXUgQeMQGUzxqigC7sLoKmcaLFDZGkpXIZOa8ZvlI8OsfWi9C6bjQ9wXfVYf0Ik4GwtdCaosT0vSV5-pck-DRdSSbXGO4lblTqTX1DFqSQ1cb8hoqrQI/s1600/ATK+vs+STO.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiG3e96C8OANKSKim_3q3TqbYKPXUgQeMQGUzxqigC7sLoKmcaLFDZGkpXIZOa8ZvlI8OsfWi9C6bjQ9wXfVYf0Ik4GwtdCaosT0vSV5-pck-DRdSSbXGO4lblTqTX1DFqSQ1cb8hoqrQI/s400/ATK+vs+STO.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins share price as compared to Statoil (2.0% of ATK revenue*)<br />
<i>Source: Bloomberg, *Bloomberg SPLC</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEic98P4nrErBijp2Xu_cYHSvMR_4gpUiLqn6xztxbgzUTQ_G3kHu5bsBma2GrcujTFYyJ1Hb4M9RHVlDZcpyBYjIuuCZr9t3gVWuA2zb7U293jmglMpTQXCPT1k_8yYmkwp-uV2EzvZt34/s1600/ATK+vs+CVX.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEic98P4nrErBijp2Xu_cYHSvMR_4gpUiLqn6xztxbgzUTQ_G3kHu5bsBma2GrcujTFYyJ1Hb4M9RHVlDZcpyBYjIuuCZr9t3gVWuA2zb7U293jmglMpTQXCPT1k_8yYmkwp-uV2EzvZt34/s400/ATK+vs+CVX.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins share price as compared to Chevron (1.4% of ATK revenue*)<br />
<i>Source: Bloomberg, *Bloomberg SPLC</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7f6z41LXYdhnigiZLI9QgydHHUxz4hP9yF5x4t05AzWruySyftH7xCcbRyeuPRP54WuJcgCeWecLOsxpqTfUutoYMaNmHYRw8-LMGmmHriOoo2tFP4nsSHUsSeUgzm8FkMiNmTzwBqOY/s1600/ATK+vs+ENI.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7f6z41LXYdhnigiZLI9QgydHHUxz4hP9yF5x4t05AzWruySyftH7xCcbRyeuPRP54WuJcgCeWecLOsxpqTfUutoYMaNmHYRw8-LMGmmHriOoo2tFP4nsSHUsSeUgzm8FkMiNmTzwBqOY/s400/ATK+vs+ENI.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins share price as compared to ENI (1.3% of ATK revenue*)<br />
<i>Source: Bloomberg, *Bloomberg SPLC</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj11SnJU_zRdkUm25_7XTn0ncJOa9OBA1JKm6qk92_0FI4gFsxDR9aUemidVHrFKGhjJSDqKQWsXSkGO60ueuRuamKxJsILpti2EdGSnwGuSNMjepOUnVZwiJru9l_aDsPQRc4_HjOJxq0/s1600/ATK+vs+RR.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj11SnJU_zRdkUm25_7XTn0ncJOa9OBA1JKm6qk92_0FI4gFsxDR9aUemidVHrFKGhjJSDqKQWsXSkGO60ueuRuamKxJsILpti2EdGSnwGuSNMjepOUnVZwiJru9l_aDsPQRc4_HjOJxq0/s400/ATK+vs+RR.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atkins share price as compared to Rolls Royce (0.7% of revenue*)<br />
<i>Source: Bloomberg, *Bloomberg SPLC</i></td></tr>
</tbody></table>
I'm short Atkins.<br />
<br /></div>
<div style="text-align: justify;">
<div class="MsoNormal">
<span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: x-small;">Disclaimer: The information, discussions
or topics referred to on this blog should in no way be considered “advice” to
buy or sell anything. The information which may be referred to is freely
available in the public domain and where required the source of information is
referenced to for verification. While every effort has been made to ensure the
veracity of any information contained within this blog, the author accepts no
responsibility for the accuracy of any information contained within this blog or
for the sources of information which may be referred to. Readers are
responsible for their own actions and interpretation of the information
contained within this blog. </span><o:p></o:p></div>
</div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com0tag:blogger.com,1999:blog-9008707982090470413.post-11455045930094783372015-11-05T14:42:00.002-08:002015-11-05T14:42:50.615-08:00Wirecard (WDI GY) ... Suvidhaa vs. GI Retail<div style="text-align: right;">
Thursday 5th November 2015</div>
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<br /></div>
<div style="text-align: justify;">
In my previous post I wrote about Wirecard's acquisition of <a href="http://www.lordshipstrading.blogspot.co.uk/2015/11/wirecard-wdi-gy-great-indian-retail.html" target="_blank"><span style="color: cyan;">Great Indian Retail Group</span></a>. </div>
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<br /></div>
<div style="text-align: justify;">
Here are the main details <a href="https://www.wirecard.com/newsroom/press-releases/newsdetail/wirecard-acquires-payments-business-of-great-indian-gi-retail-group/" target="_blank"><span style="color: cyan;">as indicated</span></a> by Wirecard:</div>
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</div>
<ul>
<li><span style="color: #cc0000;">Wirecard is set to buy GI Retail for €230 million in cash. </span></li>
<li><span style="color: #cc0000;">A further payment up to €110 million is possible, linked to the overall financial performance of the acquired businesses in calendar years 2015 to 2017.</span></li>
<li><span style="color: #cc0000;">Consolidated revenue for the acquired businesses is expected to exceed €45 million in calendar year 2015, an increase of more than 50 per cent compared to calendar year 2014. </span></li>
<li><span style="color: #cc0000;">EBITDA is expected to more than double year on year to exceed €7 million. </span></li>
<li><span style="color: #cc0000;">Revenue for calendar year 2016 is expected to exceed €75 million and EBITDA after integration costs is expected to be between €15 million to €18 million. </span></li>
</ul>
<br />
<div style="text-align: justify;">
On this basis, the businesses being acquired under GI Retail appear very attractive. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Revenue is expected to rise by over 50% in 2015 and increase by a further 67% in 2016. </div>
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<br /></div>
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The EBITDA margin is expected to be 15.5% in 2015 and rise to somewhere between 20% to 24% in 2016. </div>
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<br /></div>
<div style="text-align: justify;">
No wonder Wirecard is potentially paying €340 million or c. 7.5x projected 2015 sales or c. 49x forecast 2015 EBITDA to acquire GI Retail. </div>
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<br /></div>
<div style="text-align: justify;">
In my previous post, I also mentioned a company called Suvidhaa Infoserve Pvt. Ltd. </div>
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: justify;">
<span style="color: red;">Suvidhaa Infoserve Pvt. Ltd</span></h2>
<div style="text-align: justify;">
According to <a href="http://www.suvidhaa.com/" target="_blank"><span style="color: cyan;">Suvidhaa's website</span></a>, <i><span style="color: #cccccc;">"Suvidhaa is a renowned company in the payment and remittances space."</span></i> </div>
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<br /></div>
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Here is the front page to Suvidhaa's website:</div>
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<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXdkA2mvVhZaQclbcHCzblApH3pszls4LpnvtvFRkIJdAE_ZR76qGu1IEor_f-ZjBMVcMUgMJo-V_fyBvvOL-rDrEhODaTZZKD21jYOR5ULJpZ_KSXctIQKLKHQujFmyyRahdBx2-BI4c/s1600/Suvidhaa+website.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXdkA2mvVhZaQclbcHCzblApH3pszls4LpnvtvFRkIJdAE_ZR76qGu1IEor_f-ZjBMVcMUgMJo-V_fyBvvOL-rDrEhODaTZZKD21jYOR5ULJpZ_KSXctIQKLKHQujFmyyRahdBx2-BI4c/s400/Suvidhaa+website.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Suvidhaa website<br />
<i>Source: www.suvidhaa.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Suvidhaa says it is a <i><span style="color: #cccccc;">"... leading aggregator of multiple services like utility bill collection, insurance premium, mobile and DTH recharge, travel tickets, money transfer services on a single platform through a network of 80,000 franchises outlets across the country."</span></i></div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv6PG23MGzbSjhOMxdNz9478H17hEjiNT20qKS1cE0V7viMkt2xQqN9O2Kvyby-wHac5PrazvhL7V1D-W-HdX2dn5Dguy9VivJuKdJ9J0Wm3R98IpIaSBTk564dRgRqHwqn1mGfohus8E/s1600/Suvidhaa+website+about+us.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="276" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv6PG23MGzbSjhOMxdNz9478H17hEjiNT20qKS1cE0V7viMkt2xQqN9O2Kvyby-wHac5PrazvhL7V1D-W-HdX2dn5Dguy9VivJuKdJ9J0Wm3R98IpIaSBTk564dRgRqHwqn1mGfohus8E/s400/Suvidhaa+website+about+us.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">About Suvidhaa<br />
<i>Source: www.suvidhaa.com/aboutus</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Suvidhaa's website appears somewhat more refined than GI Retail's. For a start it clearly states who the management team is, with detailed biographies for seven members of that team. By contrast, GI Retail's main website mentions nothing of its management. However, GI Technology's website does provide biographies of the group's management.<br />
<br />
Further, Suvidhaa's website details the group's investors. These include Norwest Venture Partners, Reliance Venture Asset Management Ltd, International Finance Corporation, and Mitsui & Co. By contrast, GI Retail's website mentions nothing of its financial backers. There is yet another website with details of GI Retail. This is at <a href="http://www.zoomcard.in/"><span style="color: cyan;">www.zoomcard.in</span></a>. It's a rather incomplete site as around half the links do not work including the link that should direct to the group's investors. <br />
<br />
Here is a YouTube video of Suvidhaa's founder and Chairman, Mr Paresh Rajde, seemingly being interviewed on an Indian financial news broadcast.<br />
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<div class="separator" style="clear: both; text-align: center;">
<iframe width="320" height="266" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/aoViZurpkxA/0.jpg" src="https://www.youtube.com/embed/aoViZurpkxA?feature=player_embedded" frameborder="0" allowfullscreen></iframe></div>
<br />
Here is a YouTube video of GI Retail's Managing Director, Mr Ramu Annamalai Ramsamy, seemingly at a desk in a small cupboard. The video has some editing issues as it's rather jumpy throughout as Mr Ramu Annamalai Ramsamy talks through ICASHCARD.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<iframe width="320" height="266" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/5YwjGS3Wzuc/0.jpg" src="https://www.youtube.com/embed/5YwjGS3Wzuc?feature=player_embedded" frameborder="0" allowfullscreen></iframe></div>
<br />
<h2>
<span style="color: red;">Customers</span></h2>
<ul>
<li>Suvidhaa claims <i><span style="color: #cc0000;">"3 Crore (30 million) satisfied customers."</span></i></li>
<li>GI Retail declares to have <i><span style="color: #cc0000;">"... served more than 60 million customers for travel and payment services across our agent network in 2014."</span></i></li>
<li>GI Technology mentions <i><span style="color: #cc0000;">"GI has fast grown to serve more than 1 crore (10 million) customers in the under banked segment."</span></i> </li>
</ul>
<h2>
<span style="color: red;">Transactions</span></h2>
<ul>
<li>Suvidhaa claims <i><span style="color: #cc0000;">"1.5 Lakh (150 thousand) transactions daily."</span></i></li>
<li>GI Retail indicates that <i><span style="color: #cc0000;">"Over the last years we have issued more than 35 million money transfer accounts for financial institutions, including our own ICASH wallet."</span></i></li>
<li>ICASHCARD <a href="https://youtu.be/0kvI6JIcCJI" target="_blank"><span style="color: cyan;">YouTube video</span></a> claims <span style="color: #cc0000;"><i>"Every month ICASH wallet is doing close to 1.5 million transactions, helping migrant and marginal workforce to send money safely and instantly."</i></span> </li>
<li>GI Technology highlights that <i><span style="color: #cc0000;">"We provide more than 200,000 people daily with access to affordable financial services and other related services and through our retail partners offer tens of thousands of retailers the opportunity to earn extra money by driving financial inclusion in India."</span></i> </li>
</ul>
<h2>
<span style="color: red;">Locations</span></h2>
<ul>
<li>Suvidhaa claims to be present across a network of <i><span style="color: #cc0000;">"80,000 retail outlets."</span></i></li>
<li>GI Retail suggests that its Hermes newtork has <i><span style="color: #cc0000;">"... more than 90,000 locations across India, more than 9,000 locations on (sic) the Philippines and retail partnerships in Indonesia and Malaysia."</span></i></li>
<li>GI Technology mentions that <i><span style="color: #cc0000;">"ICASH wallet is also being distributed by other partner networks numbering more than 100,000 agents across India."</span></i></li>
</ul>
<br />
On the tale of the tape, Suvidhaa appears to be a remarkably similar business to GI Retail.<br />
<br />
Here are Suvidhaa's accounts to 31 March 2014:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicJK36gibhbdLhN8_zkQ0GzBpoFqQcYYsoltwGq5FOQfjRMaIxMdDtO6AvV1r4aIwNJmtxpMX_YXbhCP9_b8laMDYLdIroXm9IswTZbRePiisv7evYKDNY20U3vpzwrADKlYN5bzeid2M/s1600/Page+one.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicJK36gibhbdLhN8_zkQ0GzBpoFqQcYYsoltwGq5FOQfjRMaIxMdDtO6AvV1r4aIwNJmtxpMX_YXbhCP9_b8laMDYLdIroXm9IswTZbRePiisv7evYKDNY20U3vpzwrADKlYN5bzeid2M/s400/Page+one.jpg" width="367" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Suvidhaa Infoserve Private Limited annual report<br /><i>Source: www.mca.gov.in</i></td></tr>
</tbody></table>
Here is Suvidhaa's balance sheet to 31 March 2014:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijmByGu18b0IxZ0FThJmwGsFmxEJqcbuYgOoNP9xoatG73JuXH2s56r2lPNnH6DlcmOwugA-S5ASaIht5DxFMaRNiI9Mj1HAQq3T7TX7RDUS0_cUo9oZcnf5MBmkWozdYNLffX5VEDnDM/s1600/Balance+sheet.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="390" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijmByGu18b0IxZ0FThJmwGsFmxEJqcbuYgOoNP9xoatG73JuXH2s56r2lPNnH6DlcmOwugA-S5ASaIht5DxFMaRNiI9Mj1HAQq3T7TX7RDUS0_cUo9oZcnf5MBmkWozdYNLffX5VEDnDM/s400/Balance+sheet.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Suvidhaa Infoserve Private Limited balance sheet to 31 March 2014<br /><i>Source: www.mca.gov.in</i></td></tr>
</tbody></table>
At the time of posting there is c. 101 Indian Rupees to the pound, Sterling.<br />
<br />
According to its balance sheet, Suvidaah's net assets totaled 404,808,529 Indian Rupees (INR) or c. £4 million as at 31 March 2014.<br />
<br /></div>
<div style="text-align: justify;">
Here is Suvidhaa's P&L to 31 March 2014:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2HJaQ3k_jNq_t1UtShrPVY7li04xXvoA9sFVKh8nFtZLnog8BenjePBf86bACXJY5XPgG4Dvnef4SzqjiIFItQHKICaVzN4mf8E0Ogt36OyeOhO-EHdVvHrkgplxRVQCn7MQKa10aic0/s1600/Profit+and+loss+1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2HJaQ3k_jNq_t1UtShrPVY7li04xXvoA9sFVKh8nFtZLnog8BenjePBf86bACXJY5XPgG4Dvnef4SzqjiIFItQHKICaVzN4mf8E0Ogt36OyeOhO-EHdVvHrkgplxRVQCn7MQKa10aic0/s400/Profit+and+loss+1.jpg" width="302" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Suvidhaa Infoserve Private Limited P&L to 31 March 2014<br /><i>Source: www.mca.gov.in</i> </td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlm_RDwXJIGxBUs0X-xdqHyng6U8dwdO0TC7nLKeyKk2-Wc4EF8emQIp8cZpRaKKmRKD1-52RPOtFwp4yAunQBtjRjXcyxieTuMSQKEZ2n3BqtakmTaRFd2zrIcAndYHepWPagORkPtmY/s1600/Profit+and+loss+2.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlm_RDwXJIGxBUs0X-xdqHyng6U8dwdO0TC7nLKeyKk2-Wc4EF8emQIp8cZpRaKKmRKD1-52RPOtFwp4yAunQBtjRjXcyxieTuMSQKEZ2n3BqtakmTaRFd2zrIcAndYHepWPagORkPtmY/s400/Profit+and+loss+2.jpg" width="315" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Suvidhaa Infoserve Private Limited P&L (continued) to 31 March 2014<br /><i>Source: www.mca.gov.in</i> </td></tr>
</tbody></table>
According to its P&L, Suvidhaa reported 31,753,568,481 INR or c. £314 million of gross transaction value in 2014.<br />
<br />
Total income (revenue) was reportedly 434,888,828 INR or c. £4.3 million, up 79% from 2013.<br />
<br />
EBITDA was reportedly a loss of 89,472,779 INR or c. £886,000, an improvement on a 180,498,483 INR or c. £1.8 million loss in 2013.<br />
<br />
This compares to GI Retail, which Wirecard suggests is on track for at least €45 million in revenue and greater than €7 million in EBITDA for 2015.<br />
<br />
It would seem the businesses aren't so similar after all.<br />
<br />
I am still short Wirecard. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com6tag:blogger.com,1999:blog-9008707982090470413.post-49883168649982646472015-11-03T05:55:00.000-08:002015-11-03T06:54:18.693-08:00Wirecard (WDI GY) ... Great Indian Retail Group<div class="tr_bq" style="text-align: right;">
Tuesday 3rd November 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<a href="https://www.wirecard.com/" target="_blank"><span style="color: cyan;">Wirecard</span></a> (WDI GY) is a German listed electronic payment processing company, capitalised at €5.8 billion.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOmaJc2otFnL6qdg1CKtS09GAMLoIUH42cnyy9VY-Pd0qSBKh_4hxO66blOljJF8CGPS0826yqagh0LfAKYnEHLUMb4SLwDWNbqgpfqvstgptr7jbdwM3Cw4Rn31xcLFRskZ_hXxanMCw/s1600/Share+price.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOmaJc2otFnL6qdg1CKtS09GAMLoIUH42cnyy9VY-Pd0qSBKh_4hxO66blOljJF8CGPS0826yqagh0LfAKYnEHLUMb4SLwDWNbqgpfqvstgptr7jbdwM3Cw4Rn31xcLFRskZ_hXxanMCw/s400/Share+price.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Wirecard share price<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
</div>
<div style="text-align: justify;">
By way of background, the FT's Dan McCrum has produced some impressive analysis within his <a href="http://ftalphaville.ft.com/tag/house-of-wirecard/" target="_blank"><span style="color: cyan;">The House of Wirecard</span></a> series. </div>
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<br /></div>
<div style="text-align: justify;">
Wirecard (WDI) trades on 38x 2015 and 30x 2016 consensus<span style="font-size: x-small;">*</span> earnings. </div>
<div style="text-align: justify;">
<span style="font-size: x-small;">*According to Bloomberg</span></div>
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<br /></div>
<div style="text-align: justify;">
In 2014, the group reported c. €129 million in operating cash flow, spent c. €75 million in capex and a further expenditure of c. €83 million on acquisitions.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
On Tuesday 27th October 2015, WDI announced its <a href="https://www.wirecard.com/newsroom/press-releases/newsdetail/wirecard-acquires-payments-business-of-great-indian-gi-retail-group/" target="_blank"><span style="color: cyan;">latest acquisition</span></a> having acquired an Indian based payments business, Great Indian (GI) Retail Group. GI Retail was bought for a total cash consideration of €230 million. Seemingly, Wirecard is paying 32.8x GI Retail's forecast 2015 EBITDA.<br />
<br />
Further payments of up to €110 million were also reported to be on the table, linked to financial performance in 2015 to 2017.<br />
<br />
That seems like a fair chunk of change to pay out. Especially when the Great Indian Retail Group appears to be little more than a travel booking / ticketing agency. GI Retail's operations seem to centre on the employ of a large number of staff, each with a computer terminal, typically sat in the corner of various stores or kiosks, scattered around India and the Philippines.<br />
<br />
But before I get to why I reckon this, here below is Wirecard's full press release:</div>
<blockquote style="background-color: white; color: #414b56; font-family: ff-din-web, Arial, sans-serif; margin-bottom: 1.5rem; margin-top: 1.5em;">
<div style="text-align: justify;">
<b>Wirecard AG today announced its acquisition of the payments business of Great Indian (GI) Retail Group.</b></div>
<div style="text-align: justify;">
Wirecard AG today announced its acquisition of the payments business of Great Indian (GI) Retail Group. Founded in 2006, GI Retail Group is one of India’s and South East Asia’s leading electronic payment and retail-assisted e-commerce groups.</div>
<div style="text-align: justify;">
Wirecard will acquire 100 percent of the shares from GI Retail and financial investors of companies operating payment services in India, the Philippines, Indonesia and Malaysia under the brands “iCASHCARD”, “Smartshop”, “StarGlobal”, “Commerce Payment” as well as several segment brands. </div>
<div style="text-align: justify;">
Furthermore, Wirecard will also acquire 60 percent of the shares in GI Technology Private Limited (GIT), a licensed Prepaid Payment Instrument (PPI) issuer in India. Wirecard will take over more than 900 staff in offices in Delhi, Chennai, Hyderabad, Bangalore, Mumbai, Kolkata, Lucknow, Manila, Batam and Kuala Lumpur.</div>
<div style="text-align: justify;">
Dr. Markus Braun, CEO of Wirecard AG, says “Great Indian (GI) Retail Group has been on the forefront of India’s very dynamic and early-stage e-commerce and money remittance market for many years. Our investment into one of the region’s leading payment groups secures us a strong position in one of the world’s most rapidly growing electronic payment markets.”</div>
<div style="text-align: justify;">
The total cash consideration paid to GI Retail and financial investors including a capital increase of GI Technology will amount to EUR 230 million, completely paid for in cash and financed by own capital and by committed bank loans. Further payments of up to a total of EUR 110 million are linked to the overall financial performance of the acquired businesses in calendar years 2015 to 2017. Elements of the agreement are subject to certain closing conditions.</div>
<div style="text-align: justify;">
By combining innovative technology and an agent-assisted service delivery model spread across multiple countries, the acquired businesses have built a unique multi-channel platform to efficiently deliver a wide range of commerce offerings and financial services in rural and urban areas.</div>
<div style="text-align: justify;">
The acquisition secures Wirecard a stake in one of India’s fastest growing licensed Prepaid Payment Instrument (PPI) issuers as well as a Full Fledged Money Changers (FFMC) license in India, enabling the operation of multi-currency transaction and remittance services.</div>
<div style="text-align: justify;">
iCASHCARD, a semi-closed-loop electronic wallet issued by GI Technology, is India’s number one domestic (IMPS) remittance instrument and the leading semi-closed-loop payment instrument on IRCTC, Indian Railways’ website and one of the largest e-commerce sites in Asia-Pacific. Serving over 200.000 people daily, iCASHCARD can be recharged with cash, on a mobile or over the Internet and is accepted at more than 10.000 e-commerce sites in India, such as eBay, AirAsia, Bookmyshow and IRCTC.</div>
<div style="text-align: justify;">
Beside of their main growth market in India, the acquired businesses have successfully established operations in other South East Asian countries. A network of more than 100.000 contracted retail agents throughout the region provides top-up services not only for iCASHCARD but in addition a wide range of cash payment, banking correspondence, bill payment and domestic as well as international remittance services.</div>
<div style="text-align: justify;">
Consolidated revenues from the acquired businesses are well on track to exceed EUR 45 million in calendar year 2015, an increase of more than 50 percent compared to calendar year 2014, and EBITDA is expected to more than double year-on-year to exceed EUR 7 million. Revenues for calendar year 2016 are expected to exceed EUR 75 million and EBITDA after integration costs is expected to be between EUR 15 million and EUR 18 million.</div>
<div style="text-align: justify;">
India constitutes the world‘s 3rd largest Internet user base with an estimated 673 million Indians being online by 2020. Growing from USD 17 billion at present, India's e-commerce industry is likely to grow at a compounded annual growth rate (CAGR) of 35 percent and to cross the USD 100-billion mark by 2020.[1] Transaction volumes in South East Asia are expected to grow from USD 7 billion in 2013 to USD 34.5 billion by 2018 , largely driven by Indonesia’s rapidly growing e-commerce industry.[2]</div>
<div style="text-align: justify;">
According to the World Bank, India continues to be the leading nation in inward remittances pulling in USD 70 billion from its global migrant workforce in 2014. The domestic remittance market in India was estimated to exceed USD 20 billion in 2014 and is benefiting from the advent of cost-effective alternatives to traditional informal channels.</div>
<div style="text-align: justify;">
[1] Source: Assocham-Pricewaterhouse Coopers, 2015</div>
<div style="text-align: justify;">
[2] Source: Frost & Sullivan, 2014</div>
</blockquote>
<div style="text-align: justify;">
<br />
<h2>
<span style="color: red; font-size: large;">What is the Global Indian Retail Group?</span></h2>
As stated in Wirecard's release, GI Retail operates under the brands of "<a href="https://icashcard.in/" target="_blank"><span style="color: cyan;">iCASHCARD</span></a>", "<a href="http://thesmartshop.in/" target="_blank"><span style="color: cyan;">Smartshop</span></a>", "StarGlobal", "Commerce Payment" as well as several segment brands. These all sound very much like what you'd imagine internet payments and processing businesses to be called. </div>
<div style="text-align: justify;">
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<div style="text-align: justify;">
The company reportedly employs over 900 staff. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
A quick google search brings up the following. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUESs5jL7c-77F0qtpyN89oAAHm3x5BnIq-t109-Wg5uo6pyvmoQm55dWC6l-ge-Z0n2OipOfp__gLX5tH4eGbWDMPlv-xo82WDk_vDNaG7Nt78dAdrIUY7fPaz6sCnynvC6oc0upXDEw/s1600/Google+1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="316" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUESs5jL7c-77F0qtpyN89oAAHm3x5BnIq-t109-Wg5uo6pyvmoQm55dWC6l-ge-Z0n2OipOfp__gLX5tH4eGbWDMPlv-xo82WDk_vDNaG7Nt78dAdrIUY7fPaz6sCnynvC6oc0upXDEw/s400/Google+1.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Google search of GI Retail<br />
<i>Source: Google</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Unsurprisingly, clicking on GI Retail takes you to its website. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhb0ldPQb1QHg0S6F0OA_LCeGss-YvFx7kTX5fyCLiZVZgW8toflhc1DBueewU2nKAyF53y1XttCRp8ENPb0AOoHOKIbm-44f7PD3S26Olsq_qZSohql0mtqOBAA19wyRhjz4ABxqIia7U/s1600/GI+Retail+website.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="326" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhb0ldPQb1QHg0S6F0OA_LCeGss-YvFx7kTX5fyCLiZVZgW8toflhc1DBueewU2nKAyF53y1XttCRp8ENPb0AOoHOKIbm-44f7PD3S26Olsq_qZSohql0mtqOBAA19wyRhjz4ABxqIia7U/s400/GI+Retail+website.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Retail website<br />
<i>Source: www.giretail.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
So far, so good. Although it's a pretty simple website. It currently has one page, detailing the three companies in the group: Hermes, GI Technology, and GI Hospitalities. The GI Retail site is so minimal, there isn't even (at the time of writing this post) the ability to click through to the individual company sub-sites. So I have placed the links below:<br />
<br />
<ul>
<li><span style="color: cyan;"><a href="http://www.hermesnetwork.in/" target="_blank"><span style="color: cyan;">www.hermesnetwork.in/</span></a></span></li>
<li><span style="color: cyan;"><a href="http://www.gitechnology.in/" target="_blank"><span style="color: cyan;">www.gitechnology.in/</span></a></span></li>
<li><a href="http://www.gihospitalities.com/" target="_blank"><span style="color: cyan;">www.gihospitalities.com/</span></a></li>
</ul>
<br />
It is perhaps somewhat odd for a company that was acquired for €230 million that the main website for the group is so basic. It also doesn't even indicate who its management are, where its principal address is, or any contact details whatsoever. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Here is slightly further down the GI Retail website. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXb2IjTI9DAR0mju64Pmg6BpyqRHevp1eW9ygZ2vcOUxXqw_1nj5QJqVaUW2m7Wvo037E5ulq8oZ1xO4xQn4f0zvtItoLPI8W9GjFnuJ8BsrSNKo6lqi89bdPpCNquhWyXOUYL7g9BDHU/s1600/GI+Retail+website+3.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="292" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXb2IjTI9DAR0mju64Pmg6BpyqRHevp1eW9ygZ2vcOUxXqw_1nj5QJqVaUW2m7Wvo037E5ulq8oZ1xO4xQn4f0zvtItoLPI8W9GjFnuJ8BsrSNKo6lqi89bdPpCNquhWyXOUYL7g9BDHU/s400/GI+Retail+website+3.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Retail website<br />
<i>Source: www.giretail.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
This suggests that <i><span style="color: #cccccc;">"GI Retail Private Limited was established in 2007 to realize the Great Indian Dream of improving the life of every aspiring Indian."</span></i></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Aside from the honorable but lofty goal, it suggests GI Retail was established in 2007 whereas Wirecard reckons in its press release above that GI Retail was established in 2006. Maybe one is a typo? </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Although, once upon a time, GI Retail was also founded in 2009, not 2006 and not 2007. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqdP3irw_qrhFANF_5atq4HPchQuliAl8refNGF2eWDtB2zsg3Sx5RHkVOf5-cFKhGBmd7t1bTAJiCBYUHeLZGewUQFv6dWnk5mgsVSD5ToeSlfDb1UqzAPkIhPNxK3-u_G0EZVQ8hNQU/s1600/GI+Retail+website+old.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="292" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqdP3irw_qrhFANF_5atq4HPchQuliAl8refNGF2eWDtB2zsg3Sx5RHkVOf5-cFKhGBmd7t1bTAJiCBYUHeLZGewUQFv6dWnk5mgsVSD5ToeSlfDb1UqzAPkIhPNxK3-u_G0EZVQ8hNQU/s400/GI+Retail+website+old.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Retail prior website<br />
<i>Source: Wayback Machine</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Indeed, the Whois information on the <a href="http://giretail.com/"><span style="color: cyan;">giretail.com</span></a> domain would suggest that the website was created in August 2009, not 2006 and not 2007. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjc4UAosiXk5fn9xGmmOOEoYrax5U7srPXoPnlJC_0oRrwpn4eFvNPOZHpvCcvPyr-sUcgQUwV0etC8jCXRHBTR6FsYdVcrWNXhTqb2CcRB9owYy5Blv-GP9ZiPO50kyOPdRbRg3DLo6Pc/s1600/Whois.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjc4UAosiXk5fn9xGmmOOEoYrax5U7srPXoPnlJC_0oRrwpn4eFvNPOZHpvCcvPyr-sUcgQUwV0etC8jCXRHBTR6FsYdVcrWNXhTqb2CcRB9owYy5Blv-GP9ZiPO50kyOPdRbRg3DLo6Pc/s400/Whois.jpg" width="292" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Retail domain creation date<br />
<i>Source: www.tcpiputils.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Further, India's Ministry of Corporate Affairs website also suggests that the group was incorporated in June 2009.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxtC0gKNcypkrC-g0qJLFp2bQBBFtfgiXbqpenXkc7paVYBiuEWVT0rg6b20c-dtieDE3zhpbazVZBpiZzngysuRzk-MJGwzBffXdfDT8_TVcH0hEBn4peq5vh3aXVN20JtKgJ4Wn84VI/s1600/MCA+date+of+incorp.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="348" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxtC0gKNcypkrC-g0qJLFp2bQBBFtfgiXbqpenXkc7paVYBiuEWVT0rg6b20c-dtieDE3zhpbazVZBpiZzngysuRzk-MJGwzBffXdfDT8_TVcH0hEBn4peq5vh3aXVN20JtKgJ4Wn84VI/s400/MCA+date+of+incorp.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Date of incorporation of GI Retail Private Limited<br />
<i>Source: Ministry of Corporate Affairs</i></td></tr>
</tbody></table>
Whatever the actual date of incorporation, both Hermes and GI Technology, two of the companies under the GI Retail umbrella, appear to have been incorporated in 2005.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsr1m8AI76PGgRB99gQ7_pM9g9-inrwn4gHGf80vRB7wjTO30NS3Wu3mg-cqJdOnXeTwjnT_ZtKMGcxkYqRAZYcmD2pT06p4ADJv0kOqiV8PNJ2Jyn7yQaUcbmpWBsLs4a2paQH6WW1m0/s1600/MCA+date+of+Hermes.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="351" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsr1m8AI76PGgRB99gQ7_pM9g9-inrwn4gHGf80vRB7wjTO30NS3Wu3mg-cqJdOnXeTwjnT_ZtKMGcxkYqRAZYcmD2pT06p4ADJv0kOqiV8PNJ2Jyn7yQaUcbmpWBsLs4a2paQH6WW1m0/s400/MCA+date+of+Hermes.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Date of incorporation of Hermes<br />
<i>Source: Ministry of Corporate Affairs</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-vOXqLqcRN1P7LnNW-oknNcK8ExpyNSWxM2EoyM7S5SfgJh6wn7d0-f0BRAfo9cyq3DS3eTghLLsfRAjsilc9UCXnaN9ZzCz8i3tcBhz9mC-Qj7mAECsMkr96ERxaDWQ1ppiz3EN4z_M/s1600/MCA+date+of+GI+Tech.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="350" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-vOXqLqcRN1P7LnNW-oknNcK8ExpyNSWxM2EoyM7S5SfgJh6wn7d0-f0BRAfo9cyq3DS3eTghLLsfRAjsilc9UCXnaN9ZzCz8i3tcBhz9mC-Qj7mAECsMkr96ERxaDWQ1ppiz3EN4z_M/s400/MCA+date+of+GI+Tech.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Date of incorporation of GT Technology<br />
<i>Source: Ministry of Corporate Affairs</i></td></tr>
</tbody></table>
The third company in the group, GI Hospitalities seems to have been incorporated in August 2010.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRieThyphenhyphenRcFX4GfrxaqZm7FUZbDbCQv4y52UsZQ4u_WFKJaZd78UXBLckUWJcSVqNr0r-zHwaNo0Lw1v-DPa3XDiaxybsyj8g1vsoBguuvnqhrHF3E2K578XjlZeIm9D8hWKDt1yhuOl8I/s1600/MCA+date+of+GI+Hospitalities.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="351" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRieThyphenhyphenRcFX4GfrxaqZm7FUZbDbCQv4y52UsZQ4u_WFKJaZd78UXBLckUWJcSVqNr0r-zHwaNo0Lw1v-DPa3XDiaxybsyj8g1vsoBguuvnqhrHF3E2K578XjlZeIm9D8hWKDt1yhuOl8I/s400/MCA+date+of+GI+Hospitalities.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Date of incorporation of GI Hospitalities<br />
<i>Source: Ministry of Corporate Affairs</i></td></tr>
</tbody></table>
Back to the GI Retail website and it claims to employ <span style="color: #999999;"><i><span style="color: #cccccc;">"nearly 1,000 staff across India and the Philippines."</span></i><span style="color: #999999;"> </span></span></div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh37YGW33gzFvxCTi3UohksCTT8PFbNT5TjKLEZk7sqaYH8gfcb3oaSH4NUU5bgF6Gycq0wGV-QLVcwqahEvTNMa15M5IH-SJ3DTWScF3O1K1OUN6NnmmPmPjIeqW_nQ9oTgpLI4tDgpZs/s1600/Staff.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="187" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh37YGW33gzFvxCTi3UohksCTT8PFbNT5TjKLEZk7sqaYH8gfcb3oaSH4NUU5bgF6Gycq0wGV-QLVcwqahEvTNMa15M5IH-SJ3DTWScF3O1K1OUN6NnmmPmPjIeqW_nQ9oTgpLI4tDgpZs/s400/Staff.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Retail website<br />
<i>Source: www.giretail.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
This echoes Wirecard's press release of the group having <i><span style="color: #cccccc;">"more than 900 staff in offices in Delhi, Chennai, Hyderabad, Bangalore, Mumbai, Kolkata, Lucknow, Manila, Batam and Kuala Lumpur."</span></i></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Returning to the Google search of "GI Retail" results from above. As you can see, six results down is the link to the GI Retail PVT Ltd LinkedIn page. </div>
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Here it is. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfV90pYJLAfcfgH6KfEjUYdm_fMYsBnjLg3V26KQdhebE8qlrbVyvDlk0dGp6Bp8xssucbRJtt3GuzkrsrySTbzWAhptSGCNuiy6APvaHZGJyK4wFic4OMTE7Pzgyf7GgkttLxoQmpiiY/s1600/LinkedIn.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="340" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfV90pYJLAfcfgH6KfEjUYdm_fMYsBnjLg3V26KQdhebE8qlrbVyvDlk0dGp6Bp8xssucbRJtt3GuzkrsrySTbzWAhptSGCNuiy6APvaHZGJyK4wFic4OMTE7Pzgyf7GgkttLxoQmpiiY/s400/LinkedIn.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">LinkedIn corporate page for GI Retail PVT Ltd<br />
<i>Source: www.linkedin.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
It is clearly the relevant LinkedIn profile page for GI Retail. The website details are there. It is based in India. </div>
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According to LinkedIn, GI Retail has between 1-10 employees. Only 1 of those employees is on LinkedIn. This doesn't seem like many employees for the TopCo of a group of companies purchased for €230 million in cash.</div>
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The one guy on LinkedIn looks like it's the HR guy. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgL9p6YNDCc2X7-cd4DFkV2yh8Pd07vd_63iqBo5V8UlgpoYB5sFgQ72k37Dxh2HGapczfuDqg8XPf3L5Z-JpYzqtJ7cNnvmVx1E12xXDXKQZwEBfV6PsHldLmUilPNqErUsy4lWke7inA/s1600/HR+guy.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgL9p6YNDCc2X7-cd4DFkV2yh8Pd07vd_63iqBo5V8UlgpoYB5sFgQ72k37Dxh2HGapczfuDqg8XPf3L5Z-JpYzqtJ7cNnvmVx1E12xXDXKQZwEBfV6PsHldLmUilPNqErUsy4lWke7inA/s400/HR+guy.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Retail's one employee on LinkedIn<br />
<i>Source: www.linkedin.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
This also looks like it could be that HR guy. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHSmslVMj0o63OAmZB97qkDsb1srxyZmdIGc1jS81nX8U-bK33TrbZvXjuAjhBf3tYRv9Xp9KGX_EkgLHWVk6aMc2s0TtTAvcLUbLMGqSxDh4x1Hf_o-QYc5pyU7-UPoykPWKP2rRmKW8/s1600/HR+guy+hiring.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="352" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHSmslVMj0o63OAmZB97qkDsb1srxyZmdIGc1jS81nX8U-bK33TrbZvXjuAjhBf3tYRv9Xp9KGX_EkgLHWVk6aMc2s0TtTAvcLUbLMGqSxDh4x1Hf_o-QYc5pyU7-UPoykPWKP2rRmKW8/s400/HR+guy+hiring.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Retail's HR Assistant Manager<br />
<i>Source: www.naukri.com</i></td></tr>
</tbody></table>
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As can be seen, he's not currently hiring. </div>
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But he has hired in the past. He says he looks for skills and roles to do with <i><span style="color: #cccccc;">"International Ticketing, Domestic Ticketing, Tour Packages, Inbound Tour, Outbound Tour, IATA, Airticket Sales, B2b Sales, Corporate Sales, Travel Agent, Hotel Contracting."</span></i></div>
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Some of his recent hires include: Call Center Manager, Call Center Executive, Business Process Outsourcing customer care executive, Net Developer, Corporate Ticketing.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9H1WlzJTa_qsGdxdTRjWtxjTHKC5ATgehYi6uEZQ9-erjHzuSKrPr4oedNU2KXz3uxMwKFak2g9puDKtUR-mUH7eVtKQgBbebCXQzT3BNWUQs4pc6yk3iwH13raRA5iCh8WX0J00btz4/s1600/Hires.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9H1WlzJTa_qsGdxdTRjWtxjTHKC5ATgehYi6uEZQ9-erjHzuSKrPr4oedNU2KXz3uxMwKFak2g9puDKtUR-mUH7eVtKQgBbebCXQzT3BNWUQs4pc6yk3iwH13raRA5iCh8WX0J00btz4/s400/Hires.jpg" width="288" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Recent hires<br />
<i>Source: www.naukri.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
What ticketing operators, tour package experience and these other types of hires have to do with electronic payment processing I am uncertain. </div>
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While the LinkedIn corporate profile for GI Retail PVT Ltd is somewhat minimal, the profile for Hermes is more substantial. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8Zzdk19t5c3cqhuYijJYv2gO-oxRjwcNPyrY796QeqmzIP67XTikGxoQmdFDRTCXE6AcUYPnCnaHdelqSSbh0OLjcrq3AiJBDu6fvZdL385qlApAWN7HQaj6NmKTYja8iyBp2CbAAzTw/s1600/Hermes+LinkedIn.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="271" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8Zzdk19t5c3cqhuYijJYv2gO-oxRjwcNPyrY796QeqmzIP67XTikGxoQmdFDRTCXE6AcUYPnCnaHdelqSSbh0OLjcrq3AiJBDu6fvZdL385qlApAWN7HQaj6NmKTYja8iyBp2CbAAzTw/s400/Hermes+LinkedIn.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">LinkedIn corporate page for Hermes i Network Private Limited<br />
<i>Source: www.linkedin.com</i> </td></tr>
</tbody></table>
<div style="text-align: justify;">
This claims somewhere between 201-500 employees. Further, that <span style="color: #999999;"><i><span style="color: #cccccc;">"Hermes is India's No. 1 Retail Assisted E-Commerce network."</span></i><span style="color: #999999;"> </span></span>And that <span style="color: #cccccc;"><i>"Hermes retail points provide services such as money transfer, bill payments for e-commerce and utilities and insurance payments, and many more."</i></span></div>
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<i><span style="color: #cccccc;">"Hermes retail points ..."</span></i>. Hmmm.</div>
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<h2>
<span style="color: red; font-size: large;">What is Hermes?</span></h2>
</div>
<div style="text-align: justify;">
<a href="http://www.tourtravelworld.com/"><span style="color: cyan;">www.tourtravelworld.com</span></a> reckons that Hermes is a travel and ticketing agent. That it has been a member since 2012, based in India. The reported address is the same as the Hermes i Network Private Limited LinkedIn profile address, namely: <i><span style="color: #cccccc;">"No C-9, Thiruvika Industrial Estate, Guindy, Chennai, Tamil Nadu, India - 600032."</span></i></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEju6kG6e_K-jrXKeYH9NUEv1of5pZw_RsBiscPTDXC09jbq3gZf_pNA1NVPYJD6Z3SJCp5jBoPdMwMiXMMxJgLolbUgpGdO9DbeXBHgS1NE5OZ-zdfgEUaFicwCTUV1x8Btumk_I2GXTZ8/s1600/Tour+Travel+World.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEju6kG6e_K-jrXKeYH9NUEv1of5pZw_RsBiscPTDXC09jbq3gZf_pNA1NVPYJD6Z3SJCp5jBoPdMwMiXMMxJgLolbUgpGdO9DbeXBHgS1NE5OZ-zdfgEUaFicwCTUV1x8Btumk_I2GXTZ8/s400/Tour+Travel+World.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">TourTravelWorld.com details on Hermes I Tickets Pvt Ltd<br />
<i>Source: www.tourtravelworld.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Here is the Hermes website, located at <a href="http://www.hermesnetwork.in/"><span style="color: cyan;">www.hermesnetwork.in</span></a>. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaKO27BG22F5wzryDS4j9iCFdOPpbGpcJ_fPULFnkpcM_6r_qIJet_Sabq_xYjabkdw9fYGEaArMSBcxNy4B1j7F-5YY9zM-Vkxj8sBEF94xCVm6N1Q1T2vMKexJW8_qW-xbFADiF8HII/s1600/Hermes+site.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="310" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhaKO27BG22F5wzryDS4j9iCFdOPpbGpcJ_fPULFnkpcM_6r_qIJet_Sabq_xYjabkdw9fYGEaArMSBcxNy4B1j7F-5YY9zM-Vkxj8sBEF94xCVm6N1Q1T2vMKexJW8_qW-xbFADiF8HII/s400/Hermes+site.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Hermes - Destination Future website<br />
<i>Source: www.hermesnetwork.in</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
It doesn't mention much about travel agents or bookings. It does about <i><span style="color: #cccccc;">"Money transfer, bill payments and so much more."</span></i> It looks pretty snazzy.</div>
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<div style="text-align: justify;">
This appears to be a relatively new site, seemingly created in May 2015, registered by Hermes i Tickets. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgan5g2YewJW055gqWQcCG7vSgcsMFl_IwJnK6y5qnq7_8etEYjPUVKFSHgf7KuEdBnRizCoVENsbsWPq83HanVn_-spTYDV51uAf4hhI8xEUYmrzA9IEevwmwmhZT9rKhSmvjKiMeRIdc/s1600/Hermes+domain.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgan5g2YewJW055gqWQcCG7vSgcsMFl_IwJnK6y5qnq7_8etEYjPUVKFSHgf7KuEdBnRizCoVENsbsWPq83HanVn_-spTYDV51uAf4hhI8xEUYmrzA9IEevwmwmhZT9rKhSmvjKiMeRIdc/s400/Hermes+domain.jpg" width="282" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Hermesnetwork.in domain creation date<br />
<i>Source: www.tcpiputils.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Here is another version of the Hermes site just a few months earlier from February 2015. It is/was located at <a href="http://www.hermes-it.in/"><span style="color: cyan;">www.hermes-it.in</span></a>, which if you enter into your browser these days will redirect you to the new site <a href="http://www.hermesnetwork.in/"><span style="color: cyan;">www.hermesnetwork.in</span></a>. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMpReMkN9uuui32H1AWbyvwAISwKK7TDKBkdUTDJS6OhcreMJD7WsgeIut1WnvqO9iS37tXLQwsIZeiSSqM3n6xHAsJl9wFG3cOPc3kTOfkgwqkgxYSbyEQzGBDdiZ4NJXdRa_K5nt0fg/s1600/Hermes+Feb+2015.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMpReMkN9uuui32H1AWbyvwAISwKK7TDKBkdUTDJS6OhcreMJD7WsgeIut1WnvqO9iS37tXLQwsIZeiSSqM3n6xHAsJl9wFG3cOPc3kTOfkgwqkgxYSbyEQzGBDdiZ4NJXdRa_K5nt0fg/s400/Hermes+Feb+2015.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Hermes website from February 2015<br />
<i>Source: Wayback Machine</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiL-w0tjld3cCBZVgoa-7JTBPOAX7GKlh43MfL0NC25zebaYf6r1COWQujqRB0iWcMJJLKltxnP5W0LR-2EJ0wrVhoA8WXK6x2Svcn7o8dMMuNNyU4Q_fsYBwyaOlb2LuqfPvmSc-AjCao/s1600/Hermes+2015+2.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiL-w0tjld3cCBZVgoa-7JTBPOAX7GKlh43MfL0NC25zebaYf6r1COWQujqRB0iWcMJJLKltxnP5W0LR-2EJ0wrVhoA8WXK6x2Svcn7o8dMMuNNyU4Q_fsYBwyaOlb2LuqfPvmSc-AjCao/s400/Hermes+2015+2.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Hermes website from February 2015<br />
<i>Source: Wayback Machine</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Back in February 2015 there was very little mention of <i><span style="color: #cccccc;">"Money transfer, bill payments and so much more."</span></i> What was principally highlighted was the travel side of the business. </div>
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</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Incidentally, on the the travel side of the business, it would appear that Hermes is the proud owner of its <i><span style="color: #cccccc;">"flagship product"</span></i> and travel booking site, <a href="http://www.getmytrip.com/"><span style="color: cyan;">www.getmytrip.com</span></a>. This is one of the three brands in its network, highlighted by the drop down tab on the top right of the <a href="http://hermesnetwork.in/"><span style="color: cyan;">hermesnetwork.in</span></a> site. </div>
<div style="text-align: justify;">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh54yVjzN0gEncRfdE8RHyqEH59YkIlmv0ypmF2BZ4J999p-BT0bnGKOiihoAE6Nak-JQUUuwB8_IM5VhbjXN_ys9AQd2y1oLQl0nDDooRz445KDRgZyzd2-Mi4ZHf3djU6idhPI3OQz3s/s1600/Get+My+Trip.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="303" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh54yVjzN0gEncRfdE8RHyqEH59YkIlmv0ypmF2BZ4J999p-BT0bnGKOiihoAE6Nak-JQUUuwB8_IM5VhbjXN_ys9AQd2y1oLQl0nDDooRz445KDRgZyzd2-Mi4ZHf3djU6idhPI3OQz3s/s400/Get+My+Trip.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">www.getmytrip.com</td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6gklYWLNMKuJH2MdewjW0iT7qp6lL3ceLepp21WIruzCGaV1m-boIBxAUSrVaoEUStujUNCVdPkRRzZ4cHksQXai9m_nUYKvxcUYQbFnYf3ajJ30YAsO3dx1Et7mbnaHRdiSWLacF9uY/s1600/Get+My+Trip+flagship+product.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="275" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6gklYWLNMKuJH2MdewjW0iT7qp6lL3ceLepp21WIruzCGaV1m-boIBxAUSrVaoEUStujUNCVdPkRRzZ4cHksQXai9m_nUYKvxcUYQbFnYf3ajJ30YAsO3dx1Et7mbnaHRdiSWLacF9uY/s400/Get+My+Trip+flagship+product.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">www.getmytrip.com - flagship product</td></tr>
</tbody></table>
<div style="text-align: justify;">
Indeed, in the contact section of the <a href="http://www.getmytrip.com/" target="_blank"><span style="color: cyan;">GetMyTrip</span></a> website, it shares exactly the same main contact telephone number as <a href="http://www.hermesnetwork.in/"><span style="color: cyan;">www.hermesnetwork.in</span></a>. The contact address is also the same at <i><span style="color: #cccccc;">"No C-9, Thiruvika Industrial Estate, Guindy, Chennai, Tamil Nadu, India - 600032."</span></i> </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The contact number (+91-1800-108-1080) is reportedly 24-7.<br />
<br />
It is in fact the main reported contact number for all of the Hermes, GetMyTrip, ICASHCARD and The Smart Shop businesses. However, when I called it, it appeared to redirect to a very sleepy sounding man who told me that I had the wrong number.<br />
<br />
Of course it is very possible that there were some issues in understanding what I was saying as I do not speak Indian, and he spoke very limited sleepy English. For the record, I was asking if I could plan a trip with GetMyTrip. But it makes one wonder, if all the websites are in English then why would they have a poor English speaker answering the 24-7 hotline?<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx58rFM0kY1CUCEzZ6h4S9grTWzBSItc7UIz8L0d8GshsojQiP-EKA7a-U2DviKgOq7Vno9r5Gyg6gGp_jja5scYojrs7Cy1nEONtAQaia_FXJ0M7thDIq5ldI0CzQrflspEwjPRSi6-4/s1600/Telephone+contact.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="302" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx58rFM0kY1CUCEzZ6h4S9grTWzBSItc7UIz8L0d8GshsojQiP-EKA7a-U2DviKgOq7Vno9r5Gyg6gGp_jja5scYojrs7Cy1nEONtAQaia_FXJ0M7thDIq5ldI0CzQrflspEwjPRSi6-4/s400/Telephone+contact.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Same telephone contact details on each of the Hermes, GetMyTrip, <br />
ICASHCARD, and The Smart Shop websites<br />
<i>Source: hermesnetwork.in, getmytrip.com, icashcard.in, thesmartshop.in</i></td></tr>
</tbody></table>
<br /></div>
<div style="text-align: justify;">
Maybe the value in GI Retail is all to do with the sorts of partnerships Hermes has taken up with companies such as <a href="http://mayagroup.in/home" target="_blank"><span style="color: cyan;">Maya Group</span></a>? </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Here is the home page to Maya Group. Bottom left is the logo for <a href="http://thesmartshop.in/about.html" target="_blank"><span style="color: cyan;">Smart Shop</span></a> another Hermes related product. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgN2HfqFj-NIcuQIKN2-_ifdIV1VMJun3GdtvrcXCeXKtvzXddsXdMOyRYIqOeg8nWYGt9oY46fElHclBNI17984hTQt7EbmRmyjlGdcBmQts_xUrkzuRhBkUKSxThJMZCRMV9cdJvxhiQ/s1600/Maya+Group.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgN2HfqFj-NIcuQIKN2-_ifdIV1VMJun3GdtvrcXCeXKtvzXddsXdMOyRYIqOeg8nWYGt9oY46fElHclBNI17984hTQt7EbmRmyjlGdcBmQts_xUrkzuRhBkUKSxThJMZCRMV9cdJvxhiQ/s400/Maya+Group.jpg" width="331" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Maya Group an associate of Smart Shop<br />
<i>Source: www.mayagroup.in</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<h2>
<span style="color: red; font-size: large;">What is The Smart Shop?</span></h2>
<blockquote class="tr_bq">
<i><span style="color: #cccccc;">"</span><a href="http://thesmartshop.in/about.html" target="_blank"><span style="color: cyan;">The Smart Shop</span></a><span style="color: #999999;"> </span><span style="color: #cccccc;">is the flag ship retail agent format of Hermes I Tickets Private Ltd. It has been conceived and designed to provide comprehensive end-to-end solutions to the common man for travel, money transfer and payment services at a location close to him. <b>TheSmartShop provides the common man various options</b> (based on price, comfort and convenience) <b>to plan his trip, booking of air/bus/train tickets, hotel/ car rental / holiday tour packages booking, to transfer money to any bank branch anywhere in India</b> at any time to do mobile or DTH recharge to make monthly payments for electricity, telephone, utility and credit card bills to sell online non life insurance policy for travel health and motor."</span></i> </blockquote>
</div>
<div style="text-align: justify;">
In other words, The Smart Shop sounds very much like where the common <strike>poor</strike> man without internet access goes to book a holiday, buy a train ticket, pay a bill, buy some life insurance from some bloke at a kiosk. <br />
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigUbV60ihu0FQuy26aTrbkdw0guOJLr50pBjoU6u-cs98MnJaLm4ccCzFhA_-dwqMqI4REwBSBTplcHX6PcCkAYmq9x4onoMQMM-71_uZUI_h4eC-mon3l1kavDrALR1y8bQTjE9cDEUI/s1600/Smart+shop.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="347" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigUbV60ihu0FQuy26aTrbkdw0guOJLr50pBjoU6u-cs98MnJaLm4ccCzFhA_-dwqMqI4REwBSBTplcHX6PcCkAYmq9x4onoMQMM-71_uZUI_h4eC-mon3l1kavDrALR1y8bQTjE9cDEUI/s400/Smart+shop.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Smart Shop - the flagship retail agent format of Hermes I Tickets Private Ltd<br />
<i>Source: www.thesmartshop.in</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
So how is Maya Group associated with Smart Shop?</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Well here are the details of how it works, as well as a handy photo of the lads hard at work at Maya Group and by extension one supposes, The Smart Shop too. </div>
<div style="text-align: justify;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiP0ACvsutzIS0Vh2UIMCZOJ4280f5mZieaL9x9Dx0Ku-HXxE4h-MDuco9B-6fUYZsnkXQacRiooCekeXSW8D4YMQdCPu-xdyanvacGD1p1ZCEIlIfFLziW8aKO3THdWwQ1b-8Tb41TVJ8/s1600/Maya+partnership.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiP0ACvsutzIS0Vh2UIMCZOJ4280f5mZieaL9x9Dx0Ku-HXxE4h-MDuco9B-6fUYZsnkXQacRiooCekeXSW8D4YMQdCPu-xdyanvacGD1p1ZCEIlIfFLziW8aKO3THdWwQ1b-8Tb41TVJ8/s400/Maya+partnership.jpg" width="262" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The lads at Maya Group hard at work<br />
<i>Source: www.mayagroup.in</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
You can see that those guys are poised, waiting for a lucky common man <strike>poor</strike> <strike>punter</strike> to just walk in and sit in that chair to book a holiday, buy a train ticket, pay a bill, buy some life insurance. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
If it wasn't apparent (it wasn't to me) what "S-Commerce" is, as alluded to in the Maya Group website, here is some information courtesy of Maya Group's other partner, Suvidhaa Infoserve PVT. Ltd. Suvidhaa Infoserve provides a helpful demonstration video on youtube. </div>
<div style="text-align: justify;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<iframe allowfullscreen="" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/oiwevUXDrQo/0.jpg" frameborder="0" height="266" src="https://www.youtube.com/embed/oiwevUXDrQo?feature=player_embedded" width="320"></iframe></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The entire 3 minutes 36 seconds is entertaining but if you skip to 2 minutes 7 seconds it explains what "S-Commerce" is.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
It would appear that "S-Commerce" is some bloke sat in the corner of an Indian store or kiosk, with a computer doing anything on the internet a common man requests to do with regards to ticket purchasing, bill paying, life insurance etc. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
So my question is this: Is GI Retail, which thus far appears to be largely a travel booking agent, employing a large group of blokes with desktops sat in various stores and kiosks scattered around India and the Philippines really worth €230 million? And how is this majorly different from a chain of internet cafes?</div>
<div style="text-align: justify;">
<br />
Incidentally, here is seemingly what The Smart Shop advertises as the job spec to hire its employees, highlighting the associated commission rates the hire can expect to earn with each item sold to the common man.<br />
<br />
It's a nice touch that it will cost the lucky applicant what looks like a non-refundable 54,000 Rupees or c. £530 <i>just</i> to apply, or about one month's expected salary. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEha4olvo8K0y3K_rYB24TINkri55f_rnql640dMyV8Z0SnUHKMKQIBzsr1iRoGqEixq54SIkY1OE_L6ustyo73q1x9gbUQRTY9EJAvHyI0Wxw90ju9xFp6ovUtxr4QZ7fkjB-JtnAdHrg0/s1600/Smart+shop+operator.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="376" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEha4olvo8K0y3K_rYB24TINkri55f_rnql640dMyV8Z0SnUHKMKQIBzsr1iRoGqEixq54SIkY1OE_L6ustyo73q1x9gbUQRTY9EJAvHyI0Wxw90ju9xFp6ovUtxr4QZ7fkjB-JtnAdHrg0/s400/Smart+shop+operator.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Job advert for a Smart Shop Distributor<br />
<i>Source: www.onlineagents.in</i></td></tr>
</tbody></table>
<h2>
<span style="color: red; font-size: large;">What about the digital presence?</span></h2>
While these businesses may be very much people driven, where some of the employees even pay an initial non-refundable charge to apply for a job, surely there is also a solid, and large accompanying digital presence?<br />
<br />
Here is the <a href="https://play.google.com/store" target="_blank"><span style="color: cyan;">Google Play</span></a> page for the <a href="https://play.google.com/store/apps/details?id=com.GetMyTrip" target="_blank"><span style="color: cyan;">Get My Trip app</span></a>.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_kHGzPp5yv63cBo4DMfnLx4vQxOWxfO-DrtGQATuk4f1OZJXBJOjMd94Ccnqoz_yjmas3xl7uJAfEkfb_ULg50g8c67FqNRYbWixPFlRKN8rw5ByM0zdLa8x8bFCkqzGjLnfaPi4WiXs/s1600/Get+My+Trip+app.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="297" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_kHGzPp5yv63cBo4DMfnLx4vQxOWxfO-DrtGQATuk4f1OZJXBJOjMd94Ccnqoz_yjmas3xl7uJAfEkfb_ULg50g8c67FqNRYbWixPFlRKN8rw5ByM0zdLa8x8bFCkqzGjLnfaPi4WiXs/s400/Get+My+Trip+app.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Get My Trip app<br />
<i>Source: Google Play</i></td></tr>
</tbody></table>
And here is where it shows that it has received 79 reviews and installed no greater than 5,000 times. It would appear there is not much of a digital presence among the common man.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWSN2zG_9a7qcGfqhiPwtQTFWryfVRDGBdcmNyz9_x2JFCsQORFdJoXrTtJMRrZStA_uPHVB1zj0oXxaJUWKgLL8VSxhba8lcmYBkPsvwosjfnaSzrDNkCMQ_yGR_XYFOLvb63WnDHY1Q/s1600/Get+My+Trip+app+reviews.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWSN2zG_9a7qcGfqhiPwtQTFWryfVRDGBdcmNyz9_x2JFCsQORFdJoXrTtJMRrZStA_uPHVB1zj0oXxaJUWKgLL8VSxhba8lcmYBkPsvwosjfnaSzrDNkCMQ_yGR_XYFOLvb63WnDHY1Q/s400/Get+My+Trip+app+reviews.jpg" width="380" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Get My Trip app reviews and installs<br />
<i>Source: Google Play</i></td></tr>
</tbody></table>
Here is the Google Play page for <a href="https://play.google.com/store/apps/details?id=com.TSSB2B" target="_blank"><span style="color: cyan;">The Smart Shop app</span></a>.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7-RhIC06UBF-UPjXsk05wFtUyKUfU2xPxugSvYjTlEb-iE91cynhyphenhyphenD0W1FCStbv6LqdGdTceGGNBHYPPVgqUBbC8G2zQdht-S3oL1UrZMH22JbukESwQKCMxPfHkltCu8iu9cKsjYLsY/s1600/The+Smart+shop+app.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="276" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7-RhIC06UBF-UPjXsk05wFtUyKUfU2xPxugSvYjTlEb-iE91cynhyphenhyphenD0W1FCStbv6LqdGdTceGGNBHYPPVgqUBbC8G2zQdht-S3oL1UrZMH22JbukESwQKCMxPfHkltCu8iu9cKsjYLsY/s400/The+Smart+shop+app.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Smart Shop app<br />
<i>Source: Google Play</i></td></tr>
</tbody></table>
And here is where it shows it has received 359 reviews and installed no greater than 50,000 times. Again this does not strike me as especially demonstrative of a major digital presence.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgK_ViRz6XtfKhBBlfOjC75brVeg0DNgB1QrmZjxqJcdwX22EQ3EtHbsApOw9ERRNcVOFiNjU-uVRQLTppv7gRZIDQNu3XQwbSnf8VoG7PiugnO4ZtEFCYm69wSHkSlaLoXFASsPwTmVOI/s1600/The+Smart+shop+app+reviews.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgK_ViRz6XtfKhBBlfOjC75brVeg0DNgB1QrmZjxqJcdwX22EQ3EtHbsApOw9ERRNcVOFiNjU-uVRQLTppv7gRZIDQNu3XQwbSnf8VoG7PiugnO4ZtEFCYm69wSHkSlaLoXFASsPwTmVOI/s400/The+Smart+shop+app+reviews.jpg" width="391" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Smart Shop app reviews and installs<br />
<i>Source: Google Play</i></td></tr>
</tbody></table>
</div>
<h2 style="text-align: justify;">
<span style="color: red; font-size: large;">What is GI Technology?</span></h2>
<div style="text-align: justify;">
The other main business under GI Retail seems to be GI Technology Private Ltd. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
This would appear to be its corporate profile page on LinkedIn. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTkwRtztpgIdzR0rHUVjoKB-VQn-OpNLUGLRC2dg9LQlySGefg43bSM93aJjkC1LL3oR-CJ9ARGnQDiSaXIvsuOq6MmtvghNEFkK70LrSDShohMR_HeH1AqgUZzht4th4DyRG5wwTN1uY/s1600/GI+Tech+linkedIn.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTkwRtztpgIdzR0rHUVjoKB-VQn-OpNLUGLRC2dg9LQlySGefg43bSM93aJjkC1LL3oR-CJ9ARGnQDiSaXIvsuOq6MmtvghNEFkK70LrSDShohMR_HeH1AqgUZzht4th4DyRG5wwTN1uY/s400/GI+Tech+linkedIn.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">LindkedIn corporate page for GI Technology Pvt Ltd<br />
<i>Source: www.linkedIn.com</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
Very little detail is provided. Not even the website address. 44 employees seem to be on LinkedIn. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Here is the lower section of the front page of <span style="color: cyan;"><a href="http://www.gitechnology.in/index.html" target="_blank">GI Technology's</a> </span>website. As it highlights, Hermes is one of its partners, as is Suvidhaa, the other "S-Commerce" partner with Maya Group, above. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEio9asYDAZaRC9XCsnS8vOPxlL9yXtVrYvu9YZzHC25CQym8Q7eMctzQ8xqiJyhmgyjNg384WD8lHxO4wKJoBmvfbf74ZuraQNh8j9AG6Q4EH4CdqEDYnyWjaruz1lYJsKnU5OboBxX2jg/s1600/GI+Tech+website.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="203" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEio9asYDAZaRC9XCsnS8vOPxlL9yXtVrYvu9YZzHC25CQym8Q7eMctzQ8xqiJyhmgyjNg384WD8lHxO4wKJoBmvfbf74ZuraQNh8j9AG6Q4EH4CdqEDYnyWjaruz1lYJsKnU5OboBxX2jg/s400/GI+Tech+website.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GI Technology partners and products<br />
<i>Source: www.gitechnology,in</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
iCASHCARD is GI Technology's product. It was mentioned in Wirecard's press release at the beginning of this post.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
On its website, GI Technology's indicates that it is <i><span style="color: #cccccc;">"... the issuer of iCASH, India's leading prepayment instrument (PPI) further to a licence granted to GIT by the Reserve Bank of India (RBI) on 29 October 2009."</span></i></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
But what sort of licence was this? It seems to be just a payment card licence. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
What GI Technology doesn't appear to have is a "Payment Bank" Licence, of which 11 were issued by the Reserve Bank of India on 19 August 2015. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
GI Technology did apply for a Payment Bank licence, along with 40 others. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSFXJqkvo_R50mWiSK6loVblhBT9tUqXpJtQp2NQDC8ZSUVRhN-sjN-6JmulujCzPtpqStGQSPuT9ukNy18n9awsjabUVSM9Uao7N9vYST_H1wlA4VZFs3TL3mO-1BoJGJEOSiD_GTD5U/s1600/Doesnt+have+a+prepayment+banking+licence.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="338" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSFXJqkvo_R50mWiSK6loVblhBT9tUqXpJtQp2NQDC8ZSUVRhN-sjN-6JmulujCzPtpqStGQSPuT9ukNy18n9awsjabUVSM9Uao7N9vYST_H1wlA4VZFs3TL3mO-1BoJGJEOSiD_GTD5U/s400/Doesnt+have+a+prepayment+banking+licence.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Applicants for Payment Bank Licence<br />
<i>Source: www.rbi.org.in</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
But only 11 appear to have been issued a licence. And GI Technology doesn't seem to be one. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhpturcxb85I9JOpNfKrwDOZcA6Iq7AA_pI3y_mc52tuMIXMJFGy7-Ysg0oMB0NjhyyXDg_aAWt680Ei5tGiu6KXUj1zlEJ_7YDrLhV3Xg91KW2k8U8ax_h40DFkFQMJkVt2U2sKybb1M/s1600/Does+have+a+prepayment+banking+licence.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="215" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhpturcxb85I9JOpNfKrwDOZcA6Iq7AA_pI3y_mc52tuMIXMJFGy7-Ysg0oMB0NjhyyXDg_aAWt680Ei5tGiu6KXUj1zlEJ_7YDrLhV3Xg91KW2k8U8ax_h40DFkFQMJkVt2U2sKybb1M/s400/Does+have+a+prepayment+banking+licence.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Applicants granted in principle a Payment Bank Licence<br />
<i>Source: www.rbi.org.in</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<h2>
<span style="color: red; font-size: large;">And another thing</span></h2>
These types of kiosk based, travel, ticketing, money transfer businesses seem to be two a Rupee in India. Here's 19 others for starters.<br />
<ol>
<li>Suvidhaa Infoserve Pvt. Ltd</li>
<li>Oxigen Services Pvt. Ltd</li>
<li>Eko India Financial Services Ltd</li>
<li>Payworld (Sugal and Damani)</li>
<li>Reliance Money Infrastructure Ltd</li>
<li>Easy Bill Ltd (Hero Group)</li>
<li>Multilink MOS Utility Pvt. Ltd</li>
<li>Paypoint India Network Pvt. Ltd</li>
<li>ITZ Cash Ltd</li>
<li>Beam Money Pvt. Ltd</li>
<li>Seed Financial Services Pvt. Ltd</li>
<li>mPurse Services Pvt. Ltd (Infotel Group)</li>
<li>FIA Technology Services Pvt. Ltd</li>
<li>Spice Digital Ltd</li>
<li>EZspend Prepaid Payment Solutions Pvt. Ltd</li>
<li>Sollet Soft Solutions Pvt. Ltd</li>
<li>Muthoot Finance Ltd</li>
<li>Mannapuram Finance Ltd</li>
<li>BASIX Sub-K iTransactions Ltd</li>
</ol>
</div>
<div style="text-align: justify;">
As for digital presence, here is a randomly searched for ticketing app in India.<br />
<br />
A quick search threw out the "Ticket Booking and Recharge" app.<br />
<br />
According to Google Play:<br />
<br />
<ul>
<li>This app has 6,829 reviews as compared to The Smart Shop app's 359 reviews. </li>
<li>This app has 500,000 to 1,000,000 installs as compared to The Smart Shop app's 10,000 to 50,000 installs. </li>
</ul>
<br />
Note also the other similar ticket booking apps recommended below.<br />
<br />
According to Google Play:<br />
<br />
<ul>
<li>The offical IRCTC Connect has 131,111 reviews and 5,000,000 to 10,000,000 installs. </li>
<li>Indian Rail IRCTC & Train PNR has 14,404 reviews and 500,000 to 1,000,000 installs.</li>
</ul>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpS_dQqX_mte_vRlo057i9m5z6sl8kXBOCAQ-eH0KYOBR70A-E4GIY-9qqK8twhN4btJzSxQdVNjfl3vA7oB1ftgJms94nPj9u1TEH3Xl6qQkBCfNbevbtzkfyv_cTxuKkogOFINN4jHE/s1600/Ticket+booking+app.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="366" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpS_dQqX_mte_vRlo057i9m5z6sl8kXBOCAQ-eH0KYOBR70A-E4GIY-9qqK8twhN4btJzSxQdVNjfl3vA7oB1ftgJms94nPj9u1TEH3Xl6qQkBCfNbevbtzkfyv_cTxuKkogOFINN4jHE/s400/Ticket+booking+app.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">A competing ticket booking app - Ticket Booking and Recharge<br />
<i>Source: Google Play</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEio2EQu5F2f9ChbI8cUqHMFWi6xhHyUBZMDX2zeS2uaFpKSgqzHmSMl63Pono1WDZIryfRlXbBZK011H6idLPOwQ04g-XLRSPEXrjf9wywZlDCLM53ypwL1lIpT1s_uuxwl6dW0YeVKQn8/s1600/Ticket+booking+app+reviews.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="211" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEio2EQu5F2f9ChbI8cUqHMFWi6xhHyUBZMDX2zeS2uaFpKSgqzHmSMl63Pono1WDZIryfRlXbBZK011H6idLPOwQ04g-XLRSPEXrjf9wywZlDCLM53ypwL1lIpT1s_uuxwl6dW0YeVKQn8/s400/Ticket+booking+app+reviews.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Reviews of Ticket Booking and Recharge<br />
<i>Source: Google Play</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgENQXuSp-o2rb38etdbTZXLmumZCAr8j5Od_zzKPAdxZXjjNJRsGl_gT6CcyJZOxs_9k0tq__qIqaDpT24z241tJxI34_k6JTokKvd8FBq0bJMjP45a40wuI07XNazcsQ3X9T8HIvxBzw/s1600/Ticket+booking+app+installs.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="323" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgENQXuSp-o2rb38etdbTZXLmumZCAr8j5Od_zzKPAdxZXjjNJRsGl_gT6CcyJZOxs_9k0tq__qIqaDpT24z241tJxI34_k6JTokKvd8FBq0bJMjP45a40wuI07XNazcsQ3X9T8HIvxBzw/s400/Ticket+booking+app+installs.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Installs of competing ticket booking app and other similar recommended apps<br />
<i>Source: Google Play</i></td></tr>
</tbody></table>
I reckon GI Retail is an altogether strange acquisition for €230 million.<br />
<br />
I am short Wirecard.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: "helvetica neue" , "arial" , "helvetica" , sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></span> </div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com30tag:blogger.com,1999:blog-9008707982090470413.post-18238328163505025412015-10-30T08:35:00.001-07:002015-10-30T09:24:31.638-07:00Noise and Dialight (DIA) ... wimps & romantics<div style="text-align: right;">
Friday 30th October 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
My inbox coughed up a <i><span style="color: red;">"Conviction List Update"</span></i>. Its content issued from some of the finest, indefatigable minds in broker land. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Having read the word conviction, I reckoned on the substance being top notch. Sure things. Bullish patterns. Great numbers. Super-fired. Plenty room for upside. Coiled and ready for a big move up. </div>
<div style="text-align: justify;">
The sky <u><i>is</i></u> the limit. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Hands beginning to shake I carefully placed my cup of tea back on its coaster. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
And there it was. The fool proof ideas I never knew I needed.</div>
<div style="text-align: justify;">
<br /></div>
<blockquote class="tr_bq" style="text-align: justify;">
<span style="color: red; font-size: large;">"Just Eat & Trinity Mirror In. Chemring out."</span> </blockquote>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Hang on a sec. Chemring out?</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Chemring had a profit warning on Monday. Its stock's dropped 24% since. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
That's some conviction. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Where was the courage in this list of conviction? The strength in the face of pain and grief? </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
And good grief, 24% was plenty of pain. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
I picked my cup of tea back up and turned my attention to Dialight. </div>
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: justify;">
<span style="color: red; font-size: x-large;">Dialight</span></h2>
<div class="separator" style="clear: both; text-align: center;">
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEinHcjNTffCxizT8p9CCl6dBvTKeIeM6OE9K8QB-H7SSLNzM39CZaZe7eVMiMj-y6TOAu1fh2oGaU0NS6tZtWAIuDdsAqrAhbcLGACr7LsT8hpnsQ0E-EPWkObbYzYHCH6D6yKGSkKGYWw/s1600/DIA+30+Oct+2015.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEinHcjNTffCxizT8p9CCl6dBvTKeIeM6OE9K8QB-H7SSLNzM39CZaZe7eVMiMj-y6TOAu1fh2oGaU0NS6tZtWAIuDdsAqrAhbcLGACr7LsT8hpnsQ0E-EPWkObbYzYHCH6D6yKGSkKGYWw/s400/DIA+30+Oct+2015.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight share price<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
On Wednesday, Investec was the latest broker to savagely cut its earnings forecasts for Dialight. This came after Tuesday's severe mauling by DIA's house broker, Canaccord. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Canaccord cut its operating profit forecast by 62% to £6 million for 2015. 2016's operating profit forecast was reduced 43% to £10.5 million. The lighting segment was expected to see no revenue growth in H2 2015, and bounce back by 15% in 2016. That's some bounce. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Investec was less touchy feely. It cut its 2015 EPS forecast by 73% to 4.8p/shr (implying a loss in H2) and its 2016 EPS forecast by 50% to 16.1p/shr. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Investec's numbers would put the stock on 114x 2015 forecast EPS and 34x 2016 forecast EPS. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Miraculously, Investec left DIA on a "Hold" rating. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
They all have "Buys" or "Holds". It's no mystery behind the romancing. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Whatever the recommendations, consensus earnings forecasts likely still need to go lower. According to Bloomberg, two analysts in that consensus are still in the fantasy section of broker land, one plumping for 16.6p the other 20p of earnings for 2015 and then 29.9p and 31p of earnings for 2016. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
They must be taking long vacations. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhS7GMGWUPpnE1XpI0EBjTiBgwiQyeVEU0aveSSpf4NMSeNHcVMtssRpjwVn5wAAPNdK7zrzo_tFdzBSlmUNLE9_Qcv5Unfk3tf94hsNVp_Afry5hM9PETgSFt-MxQQNQw9ggme-MGRt8Y/s1600/DIA+EPS.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhS7GMGWUPpnE1XpI0EBjTiBgwiQyeVEU0aveSSpf4NMSeNHcVMtssRpjwVn5wAAPNdK7zrzo_tFdzBSlmUNLE9_Qcv5Unfk3tf94hsNVp_Afry5hM9PETgSFt-MxQQNQw9ggme-MGRt8Y/s400/DIA+EPS.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight semi-annual EPS and implied H2 2015E EPS from consensus forecast<br />
and H2 EPS as multiple of H1 EPS<br />
<u>Prior to</u> 27th October 2015 strategic review and trading update<br />
<i>Source: DIA interim and annual reports, Bloomberg</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMqklURsewRpKDq18zVVhQ4UDkavRfun4FMpvvzOO5HbGrLBdIkTb9kg3CW5UWbzSlBe2JfGjclhrOLMTgSn34nMmaRuJm-L3wxJBwrsTxBpLTHs9y0ODGS2w4890HllgcuchipueeUAs/s1600/DIA+EPS+after.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMqklURsewRpKDq18zVVhQ4UDkavRfun4FMpvvzOO5HbGrLBdIkTb9kg3CW5UWbzSlBe2JfGjclhrOLMTgSn34nMmaRuJm-L3wxJBwrsTxBpLTHs9y0ODGS2w4890HllgcuchipueeUAs/s400/DIA+EPS+after.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Dialight semi-annual EPS and implied H2 2015E EPS from consensus forecast<br />and H2 EPS as multiple of H1 EPS<br /><u>After the</u> 27th October 2015 strategic review and trading update<br /><i>Source: DIA interim and annual reports, Bloomberg</i></span></td></tr>
</tbody></table>
<h2 style="text-align: justify;">
<span style="color: red;">And another thing</span></h2>
<div style="text-align: justify;">
During the years since DIA's earnings grew from 23.2p per share in 2010, to 36.4p per share in 2014, I calculate that the group achieved a somewhat lowly average of £1.8 million per annum in free cash flow. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The group's net cash position has dwindled from £10.4 million in 2010 and a peak of £15 million in 2012, to a net debt position of £8 million to 30th June 2015. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Quite what the FCF and net debt profile will look like over the next year or so against the backdrop of the planned realignment is uncertain. But I would reckon a £179 million market capitalisation appears somewhat lofty in the context of the group's record of FCF generation and the way consensus appears to be heading. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
No position Chemring. </div>
<div style="text-align: justify;">
No position Trinity Mirror. </div>
<div style="text-align: justify;">
I'm short Just Eat. </div>
<div style="text-align: justify;">
I'm short Dialight. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-3189810559514077072015-10-28T16:28:00.003-07:002015-10-30T09:22:11.537-07:00Globo (GBO) ... two and a bit reasons ...<div style="text-align: justify;">
... why the cash might not be there. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: right;">
Wednesday 28th October 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
As the ceramic dust settles from the self inflicted smashing of plates over the heads of Globo shareholders, the last straws are being clutched at. Does the company have all that €47 million of net cash it reported in its <a href="http://www.investegate.co.uk/globo-plc--gbo-/rns/interim-results-2015/201509290701024740A/" target="_blank"><span style="color: cyan;">interims</span></a> to 30th June 2015?</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
I very much doubt it and here's two and bit reasons why ...</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Firstly, we know that the former CEO, Mr Costis Papadimitrakopoulos "Costis", fessed up at the weekend. Although not before flogging as much of his Globo stock as was humanly possible in the weeks leading up to that. All told he is <a href="http://www.investegate.co.uk/globo-plc--gbo-/rns/director-share-dealings/201510260827533910D/" target="_blank"><span style="color: cyan;">reported</span></a> to have sold c. 42 million shares outright in the weeks leading up to Thursday 22nd October 2015, and pledged 10 million shares as collateral for a loan. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Volume data would suggest that a large chunk of Costis' stock was dumped on Tuesday 20th and Wednesday 21st October 2015, immediately following Tom Winnifrith's <a href="http://www.shareprophets.com/views/15892/tom-winnifrith-bearcast-20-october-firewors-at-globo-ahoy" target="_blank"><span style="color: cyan;">fireworks at Globo bearcast</span></a> at <a href="http://shareprophets.com/"><span style="color: cyan;">Shareprophets.com</span></a> on that Tuesday, and the call he received on the Wednesday from the FT's, Dan McCrum (<a href="http://ftalphaville.ft.com/2015/10/26/2143092/that-globo-timeline-in-full/" target="_blank"><span style="color: cyan;">that Globo timeline in full</span></a>).<br />
<br />
The volume data also suggests that the other big sales came in the days and weeks prior and before rumours of the killer <a href="http://www.qcmfunds.com/" target="_blank"><span style="color: cyan;">Quintessential Capital Management</span></a> report began. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixa1jRYCGO6b3isKQUYS19LD5b0J3ZL_mq7qEqPoepwv81FqA_xoK1IzXneIlnUgoqox5YiYyDmJppveS9WGKLQGOfKUSth2tYzQ8TSfHp1IPYkjFCmxCdseaqKt6FdqI7ZunGzBpBWyY/s1600/Volume.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixa1jRYCGO6b3isKQUYS19LD5b0J3ZL_mq7qEqPoepwv81FqA_xoK1IzXneIlnUgoqox5YiYyDmJppveS9WGKLQGOfKUSth2tYzQ8TSfHp1IPYkjFCmxCdseaqKt6FdqI7ZunGzBpBWyY/s400/Volume.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Globo trade volume data<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
If so, then it looks likely that the catalyst prompting Costis to begin his dumping of stock was the failure of the <a href="http://www.investegate.co.uk/globo-plc--gbo-/rns/high-yield-bond/201510211328479867C/" target="_blank"><span style="color: cyan;">$180 million high yield bond issue</span></a>, finally revealed as cancelled, also on Wednesday 21st October 2015. This had been dragging on since June last and so its impending failure had been a long time coming. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
One possible reason Costis began selling may have been his knowledge that a failure to raise a further and far larger debt would leave the company insolvent due to the cash balance also having been <a href="http://www.investegate.co.uk/globo-plc--gbo-/rns/company-statement/201510260819113872D/" target="_blank"><span style="color: cyan;">misrepresented and falsified</span></a>.<br />
<br />
<h2>
<span style="color: red;">That's one theory</span></h2>
</div>
<div style="text-align: justify;">
A second reason there may be no cash is from an inspection of the group's balance sheet and the receivables, payables and debt held by its subsidiaries and associates. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Below is the group's assets and liabilities to 30th June 2015</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrL6e2PUzbCenejd14JmmnUbSw28YyILDyTAcYSgf_nuZQWGu3IN3dOf-5wVgjf8lY8VtkpLpxGl-1rvdzrrFQf1IrsoHEpiCFMN1CoI556UbtmG3Fy-PKxLpWdh1va_CErR7FnejBzuA/s1600/Assets.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhrL6e2PUzbCenejd14JmmnUbSw28YyILDyTAcYSgf_nuZQWGu3IN3dOf-5wVgjf8lY8VtkpLpxGl-1rvdzrrFQf1IrsoHEpiCFMN1CoI556UbtmG3Fy-PKxLpWdh1va_CErR7FnejBzuA/s400/Assets.jpg" width="321" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Globo assets and shareholders' equity<br />
<i>Source: Globo interims</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiFm6iJ3Lkl8M1bim8KPQNyQwdhyphenhyphenCebbwAHVIJJKCdbfVxkMnMl73Ec0bswS8BvZjTwdwPH9H2nwk3y24hf4aOn1aZvBynEEqmbgxLEjMA8GqXqwu-irQDndVFrinTrvopYwFW-GcVaRI/s1600/Liabilities.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiFm6iJ3Lkl8M1bim8KPQNyQwdhyphenhyphenCebbwAHVIJJKCdbfVxkMnMl73Ec0bswS8BvZjTwdwPH9H2nwk3y24hf4aOn1aZvBynEEqmbgxLEjMA8GqXqwu-irQDndVFrinTrvopYwFW-GcVaRI/s400/Liabilities.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Globo liabilities<br />
<i>Source: Globo interims</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
The group claims €104 million in cash and cash equivalents.<br />
<br /></div>
<div style="text-align: justify;">
Also in the assets section is €55 million in trade receivables, €5 million of other receivables and €35 million in other current assets. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Within its liabilities, the group reported €57 million in borrowings, €9 million in trade and other payables and a further €10 million in other liabilities. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Without doubt the debt is definitely real, leaving the reported €47 million in net cash. What is less likely is, given the reported falsification of data, that the trade receivables, other receivables and other current assets are entirely real or ever likely to be recovered. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
However, by contrast, I would imagine that a large portion of the liabilities (excluding debt) are very real. Ex-debt and tax, the remaining liabilities come to c. €19 million. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Here is the balance sheet of Globo's divested associate, Globo Technologies, to 31st December 2014.</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidMuRfUjjaHIoS3EC4UjePLQbhvq4XKfJs73C1qIEuR4bJ3LEgPRiPNET7n2yTW4Yqm67Ocba-kpaif-uLkzYrKeR5eIjlDVqDxhuU19Ml6mLD3U3vjRiHmXsCtDEswohxKOwifNvZ4nQ/s1600/GT+bal+sheet.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="196" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidMuRfUjjaHIoS3EC4UjePLQbhvq4XKfJs73C1qIEuR4bJ3LEgPRiPNET7n2yTW4Yqm67Ocba-kpaif-uLkzYrKeR5eIjlDVqDxhuU19Ml6mLD3U3vjRiHmXsCtDEswohxKOwifNvZ4nQ/s400/GT+bal+sheet.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Globo Technologies balance sheet<br />
<i>Source: Globo Technologies</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
This shows, that Globo Technologies had a total €27 million in borrowings. As it is an associate, Globo Technologies debt will not have been consolidated into Globo's accounts. But there is possibly some risk that the debt is fully secured against Globo Plc or that Globo Plc is on the hook for at least 49% of it. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Another factor to consider is that historically all facilities provided by banks have been secured against receivables, and it was never quite understandable what the statement <i><span style="color: #999999;">"In addition, the Group has also secured major customer contracts in exchange for 60-70% of the contract value."</span></i> ever meant. <br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEich9SGRp_iEAehtC0yBuLp3Dxs2sFaMEAI3TWZoqA6yMiHqlZzCVeJd27FPH0-eBeecD0wsr4WSuZM8v16tNouzHLeBmlTx6d5UqA3RgWNyhAeud3sePswFiLFvFR8h3RBvP3Dkt-MRsM/s1600/Security.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="105" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEich9SGRp_iEAehtC0yBuLp3Dxs2sFaMEAI3TWZoqA6yMiHqlZzCVeJd27FPH0-eBeecD0wsr4WSuZM8v16tNouzHLeBmlTx6d5UqA3RgWNyhAeud3sePswFiLFvFR8h3RBvP3Dkt-MRsM/s400/Security.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Historically borrowings were secured<br />
<i>Source: Globo 2012 annual report</i></td></tr>
</tbody></table>
Further, the 2014 annual report highlights that <i><span style="color: #999999;">"When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate."</span></i><br />
<br />
So are there any legal obligations?<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_achi-dVyBp_3yMvUfFR-FJHSEsXI82tXYjYoKIVjSmRa9U3ygC5s0BakPEVgpVtv2gYykN6HDfx9qyktmfwlQ87AhynyeS0kGcTIPESUYPStuS8zZrlTiSJ-TbGqlVW6jPh37ro0jHg/s1600/Associate.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="153" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_achi-dVyBp_3yMvUfFR-FJHSEsXI82tXYjYoKIVjSmRa9U3ygC5s0BakPEVgpVtv2gYykN6HDfx9qyktmfwlQ87AhynyeS0kGcTIPESUYPStuS8zZrlTiSJ-TbGqlVW6jPh37ro0jHg/s400/Associate.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Investment in associate<br />
<i>Source: Globo 2014 annual report</i></td></tr>
</tbody></table>
<h2>
<span style="color: red;">And another thing</span></h2>
As we now know, Globo has(d) a partnership with Metis SA. Indeed, in its <a href="http://masterinvestor.co.uk/wp-content/uploads/2015/10/GBO-report-super-final.pdf" target="_blank"><span style="color: cyan;">report</span></a>, QCM reckoned on Metis being one of the satellite companies to Globo.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQgiQINuVYrM0Z3L9MEErTopqyrgkFIl6OBWRa1oQYa5R54vZD4F6nm9bZoP2Fq95rAOfcV1I5uwpmF22vjugsoeZsaeGfkNPh24oBE1ULauQYr3ZolGZhAKOFLaJ7h3OhHaZsLuLXk28/s1600/Metis.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="248" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQgiQINuVYrM0Z3L9MEErTopqyrgkFIl6OBWRa1oQYa5R54vZD4F6nm9bZoP2Fq95rAOfcV1I5uwpmF22vjugsoeZsaeGfkNPh24oBE1ULauQYr3ZolGZhAKOFLaJ7h3OhHaZsLuLXk28/s400/Metis.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Metis partnership with Globo<br />
<i>Source: www.metis-net.com/en-GB/our-partners/</i></td></tr>
</tbody></table>
According to Metis' website, Pyramis is/was a customer of Metis.<br />
<br />
Pyramis is a Greek based kitchen sink manufacturer of all things.<br />
<br />
I say is/was, as rather perversely, up until Friday 23rd October 2015, Pyramis seemingly was a customer of Metis. The Pyramis logo has mysteriously disappeared since Globo announced its financial irregularities. It is also the only customer to have seemingly disappeared from Metis' webstite.<br />
<br />
Now why would that be?<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<h2>
<span style="color: red;">Now you see it!</span></h2>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIAPBzx1_zfcSXh9e5cK-1g9UF7yKya2qmMLE0Ao4YevWwHwwzX-qd6zdF_Z1xwAq9duDzbGvFLCl-bb9ZqPB-7b_WIuX0KqIPvYbRmXWn5eVlNQW2Io5-6hQefalIl4Bvyy4Xh6HpVUo/s1600/Pyramis+main.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="232" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIAPBzx1_zfcSXh9e5cK-1g9UF7yKya2qmMLE0Ao4YevWwHwwzX-qd6zdF_Z1xwAq9duDzbGvFLCl-bb9ZqPB-7b_WIuX0KqIPvYbRmXWn5eVlNQW2Io5-6hQefalIl4Bvyy4Xh6HpVUo/s400/Pyramis+main.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Metis SA customer list including Pyramis<br />
<i>Source: Wayback machine snapshot from 23rd October 2015</i></td></tr>
</tbody></table>
<h2>
<span style="color: red;">Now you don't!</span></h2>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3BNfIYUtFbJXCBCLJM7ubWW0xXScM1yCyTejZCVjD5DOplCHwt_t8IoXfiGX60GqtZMLMeqh_AQbVcxOgrt8rxSdfT55gVdIHjbrQ7_jMCO9VT9Y5nz5PhzQnmEpH0pN93ovFkoYEXJM/s1600/Pyramis+2.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3BNfIYUtFbJXCBCLJM7ubWW0xXScM1yCyTejZCVjD5DOplCHwt_t8IoXfiGX60GqtZMLMeqh_AQbVcxOgrt8rxSdfT55gVdIHjbrQ7_jMCO9VT9Y5nz5PhzQnmEpH0pN93ovFkoYEXJM/s400/Pyramis+2.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Metis SA customer list no longer including Pyramis<br />
<i>Source: www.metis-net.com from 28th October 2015</i></td></tr>
</tbody></table>
The Pyramis website shares the same server as Altanet and indeed, bottom right of the Pyramis website is a link to Altanet's, Altab2x logo, which directs you to the Altanet website.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGVmE2bZxM1yikmvbMekGAwUkhnPveqTtTtAN6Blk5Tz7pWFTbwCvezSRVn77TGp1-jOvyOYnQSvE6r9DU7hAVTI1FImH613u3xtcpkRwLOemzK8LTD1YMssZyjpXlPIjmKFCtD039uLE/s1600/Pyramis+site.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjGVmE2bZxM1yikmvbMekGAwUkhnPveqTtTtAN6Blk5Tz7pWFTbwCvezSRVn77TGp1-jOvyOYnQSvE6r9DU7hAVTI1FImH613u3xtcpkRwLOemzK8LTD1YMssZyjpXlPIjmKFCtD039uLE/s400/Pyramis+site.jpg" width="282" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Pyramis website "Powered by altaB2x"<br />
<i>Source: www.pyramis.gr</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh02hds-hlxDj2gmPQNlyiHziqvaM0e4hpaawjJ_t2UZUQymJQRhiKq8zwruXwufpAODYY1eoU7YiPLbpVmv-iHsiL-wjZUwrmF039-lmTSxsz4ATgN7xh1FL52ZWQIfOlT2LqOLluhxZs/s1600/Altab2x.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="61" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh02hds-hlxDj2gmPQNlyiHziqvaM0e4hpaawjJ_t2UZUQymJQRhiKq8zwruXwufpAODYY1eoU7YiPLbpVmv-iHsiL-wjZUwrmF039-lmTSxsz4ATgN7xh1FL52ZWQIfOlT2LqOLluhxZs/s400/Altab2x.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Pyramis website "Powered by altaB2x"<br />
<i>Source: www.pyramis.gr</i></td></tr>
</tbody></table>
So Pyramis has some sort of relationship with Alanet.<br />
<br />
As it happens, Altanet also designed a number of the Globo subsidiary websites.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMmggKGQz_Kv2GFvbyoaBorU3ws2IlVrj_exTVqfEUBUDykO0u1vgLRSoT1LDMPhg83DzGDyrY9J5gymz4inM3i5L3sRwoU3a62gKo-yn33Tb3-w3h3e4BKPYB92pzjkticK-IsfjejOo/s1600/Altanet+profitel.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="276" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMmggKGQz_Kv2GFvbyoaBorU3ws2IlVrj_exTVqfEUBUDykO0u1vgLRSoT1LDMPhg83DzGDyrY9J5gymz4inM3i5L3sRwoU3a62gKo-yn33Tb3-w3h3e4BKPYB92pzjkticK-IsfjejOo/s400/Altanet+profitel.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Altanet's design of Globo's subsidiary, Profitel's website<br />
<i>Source: www.altanet.gr</i></td></tr>
</tbody></table>
<br />
It would appear that Altanet is a customer to Globo and vice versa.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOwy71MkNN6ZoSa3YdCNbESmySDwwNpUb0GttjQVATbpQiYU41O29CjVtyS81i_KqZZrxXiqEoZ6_1bV1nf-nb7TErDnCeWG14kXCz0A5HTzb2q-qte666OrwhKREtiKQNmQ1TiL-12OY/s1600/Altanet+partner.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="168" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOwy71MkNN6ZoSa3YdCNbESmySDwwNpUb0GttjQVATbpQiYU41O29CjVtyS81i_KqZZrxXiqEoZ6_1bV1nf-nb7TErDnCeWG14kXCz0A5HTzb2q-qte666OrwhKREtiKQNmQ1TiL-12OY/s400/Altanet+partner.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Altanet partnership with Globo<br />
<i>Source: www.altanet.gr</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0dOH8Zb1dZoOLQfQ8VQYNDrYprSvzDkfbyZos550TcOYCKyk1crxtK9yYaAxjFu-cD6DgV-YYeOXIh8sMe0v3c2SfKUNM2l4_DuZVKHHkVbv1YRGeo5ZMynccUz5_bhYpHcMG8QT4GEE/s1600/Altanet+partner+main.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="303" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0dOH8Zb1dZoOLQfQ8VQYNDrYprSvzDkfbyZos550TcOYCKyk1crxtK9yYaAxjFu-cD6DgV-YYeOXIh8sMe0v3c2SfKUNM2l4_DuZVKHHkVbv1YRGeo5ZMynccUz5_bhYpHcMG8QT4GEE/s400/Altanet+partner+main.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Altanet strategic partnership with Globo<br />
<i>Source: www.altanet.gr</i></td></tr>
</tbody></table>
<br />
So Metis is a customer/reseller/partner of Globo's.<br />
<br />
Pyramis is/was a customer of Metis; mysteriously this relationship seems to have ended in recent days.<br />
<br />
Pyramis is also a customer of Altanet.<br />
<br />
Altanet is a client of Globo and Globo is a client of Altanet.<br />
<br />
It's all rather incestuous and circular.<br />
<br />
Incidentally, a Mr. Nikolaos A. Bakatselou is the CEO of the fore-mentioned, Greek based, kitchen sink manufacturer, Pyramis.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghaeCuWvj5E7gCtqsGEB3fBevfiIhV3Xyaf-ceZb8s1Xu5vPgteKaKPk1zXXYWJ8tlNyvneS9k8C-98jd1zZsT-KLiBuzNCRHfHzECIntziD9PDwEinTDJsSSEY9bjs9A25uDMddOG6zk/s1600/Pyramis+board.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="277" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghaeCuWvj5E7gCtqsGEB3fBevfiIhV3Xyaf-ceZb8s1Xu5vPgteKaKPk1zXXYWJ8tlNyvneS9k8C-98jd1zZsT-KLiBuzNCRHfHzECIntziD9PDwEinTDJsSSEY9bjs9A25uDMddOG6zk/s400/Pyramis+board.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Pyramis Group board<br />
<i>Source: www.pyramisgroup.com</i></td></tr>
</tbody></table>
He is also on the board of the Greek based, Attica Bank.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihfdUrtkd8XWqhtQDPC_hxEf0_C6EyS-xr2Qbi40pAYf3AzUPLrUL6E6Pbn6g0gBuNORkTb1FH0Tf3y8j5LDefGNmaoLPnMXI3Z_ATPl7OEN8fn_Yz3eWbqzX0EuFW2hSB5nlSPD29g0c/s1600/Attica+Bank.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="387" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihfdUrtkd8XWqhtQDPC_hxEf0_C6EyS-xr2Qbi40pAYf3AzUPLrUL6E6Pbn6g0gBuNORkTb1FH0Tf3y8j5LDefGNmaoLPnMXI3Z_ATPl7OEN8fn_Yz3eWbqzX0EuFW2hSB5nlSPD29g0c/s400/Attica+Bank.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Attica Bank board<br />
<i>Source: www.atticabank.gr</i></td></tr>
</tbody></table>
That's the bit I found interesting.<br />
<br />
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Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com2tag:blogger.com,1999:blog-9008707982090470413.post-1532134173601439052015-10-27T09:47:00.001-07:002015-10-27T09:47:10.717-07:00Just Eat (JE/) ... more fine dining than Grub?<div style="text-align: right;">
Tuesday 27th October 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Pursuant to today's <a href="http://investors.grubhub.com/investors/press-releases/press-release-details/2015/GrubHub-Reports-Third-Quarter-Results/default.aspx" target="_blank"><span style="color: cyan;">warning</span></a> by the US listed online restaurant order and delivery service, GrubHub (GRUB US, mkt cap $2.2 billion), I sold short a few Just Eat (JE/ LN, mkt cap £2.9 billion), the UK listed online restaurant order and delivery service. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
This was not a difficult decision to make. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
You may reckon that JE/ with its superior market capitalization to GRUB is as distinguished in terms of its prospective P&L. However, this is not the case. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="color: red;"><b>For sales:</b></span></div>
<div style="text-align: justify;">
</div>
<ul>
<li>GRUB is forecast* to achieve £237 million in sales in 2015, rising 29% to £305 million in 2016. </li>
</ul>
<br />
<div style="text-align: justify;">
by contrast</div>
<div style="text-align: justify;">
</div>
<ul>
<li>JE/ is forecast* to achieve £235 million in sales in 2015, rising 34% to £315 million in 2016.</li>
</ul>
<br />
<div style="text-align: justify;">
<span style="color: red;"><b>In terms of EBITDA and EBIT:</b></span></div>
<div style="text-align: justify;">
</div>
<ul>
<li>GRUB is expected* to deliver £72/44 million in EBITDA/EBIT in 2015, rising to £96/63 million EBITDA/EBIT in 2016. </li>
</ul>
<br />
<div style="text-align: justify;">
while</div>
<div style="text-align: justify;">
</div>
<ul>
<li>JE/ is penciled* in for £55/48 million in EBITDA/EBIT in 2015, rising to £89/83 million in EBITDA/EBIT in 2016. </li>
</ul>
<br />
<div style="text-align: justify;">
<b><span style="color: red;">The major difference between the two companies appears to be in valuation:</span></b></div>
<div style="text-align: justify;">
</div>
<ul>
<li>GRUB trades* on 40x this year's earnings, falling to 31x 2016. Or alternatively an EV/EBITDA multiple of 16.9x 2015 falling to 12.7x 2016.</li>
</ul>
<br />
<div style="text-align: justify;">
as compared to</div>
<div style="text-align: justify;">
</div>
<ul>
<li>JE/ trading* on 76x this year's earnings, falling to 47x 2016. Or alternatively an EV/EBITDA multiple of 49x 2015 falling to 30x 2016. </li>
</ul>
<br />
<div style="text-align: justify;">
<span style="font-size: x-small;">*Bloomberg consensus</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
So what gives? </div>
<div style="text-align: justify;">
I reckon one set of valuations is wrong. US investor appetite would suggest it's Just Eat's. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Consequently I sold short. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiA3cX9JP3CoMBD_JbAINZCatw7LdEharZ4Y89RjzkGIhA6u05kBUz3Dt7aFSTG8rbKbRbSRn5dmyU6lnSJ9e61UnXZ2jB9868nRToPVbMV999uaYYmGOZFVAMex0THs_wPFEYZCPPFib8/s1600/GRUB+vs+JE.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiA3cX9JP3CoMBD_JbAINZCatw7LdEharZ4Y89RjzkGIhA6u05kBUz3Dt7aFSTG8rbKbRbSRn5dmyU6lnSJ9e61UnXZ2jB9868nRToPVbMV999uaYYmGOZFVAMex0THs_wPFEYZCPPFib8/s400/GRUB+vs+JE.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GRUB share price as compared to JE/<br /><i>Source: Bloomberg</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvl2-0Z0kiOKhxLF5MgVctaKSNPtvYPW4230NEfAYgapFus5Q2HRDa8WqJGH8dt1yw2mubJ_yV3Gufgb4so4A-EU-uxxsYwmoAo6PxxM1z3-PlM1fwhyphenhyphenp8vTsHKq3YYNaA5Pa1wB1ySos/s1600/PE.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhvl2-0Z0kiOKhxLF5MgVctaKSNPtvYPW4230NEfAYgapFus5Q2HRDa8WqJGH8dt1yw2mubJ_yV3Gufgb4so4A-EU-uxxsYwmoAo6PxxM1z3-PlM1fwhyphenhyphenp8vTsHKq3YYNaA5Pa1wB1ySos/s400/PE.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GRUB P/E de-rating as compared to JE/<br />Forward P/E multiple<br /><i>Source: Bloomberg</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpsuzzkyke7j7XY8gBXnezW_GCqJ2SnjJhL4eERxXRr7VyrhkOz4DABJTsA_Ma4GS-BZALpFc4rDrNBpSqEK-7oR1-_9VCHNlzyXvD6xBWIz5kqbkPho4LqtiuAZiyDsknZNQwXDMs5Gg/s1600/EVEBITDA.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpsuzzkyke7j7XY8gBXnezW_GCqJ2SnjJhL4eERxXRr7VyrhkOz4DABJTsA_Ma4GS-BZALpFc4rDrNBpSqEK-7oR1-_9VCHNlzyXvD6xBWIz5kqbkPho4LqtiuAZiyDsknZNQwXDMs5Gg/s400/EVEBITDA.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GRUB EV/EBITDA de-rating as compared to JE/<br />Forward EV/EBITDA multiple<br /><i>Source: Bloomberg</i></td></tr>
</tbody></table>
<h2 style="text-align: justify;">
<span style="color: red;">And another thing</span></h2>
<div style="text-align: justify;">
GRUB's warning (and subsequent slide in value) is probably unhelpful for any positive read across to Foodpanda, which no doubt explains why <a href="http://lordshipstrading.blogspot.co.uk/search/label/Rocket%20Internet" target="_blank"><span style="color: cyan;">Rocket Internet</span></a> fell 6% on the day. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-71918221299270251462015-10-26T02:16:00.001-07:002015-10-26T06:12:01.863-07:00Globo (GBO) ... finally, all is revealed<div style="text-align: right;">
Monday 26th October 2015</div>
<div style="text-align: justify;">
<br /></div>
<blockquote class="tr_bq" style="text-align: justify;">
<span style="color: #999999;">"Falsification of data and misrepresentation of the Company's financial situation."</span></blockquote>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Who'd have thunk it?: <a href="http://www.lordshipstrading.blogspot.co.uk/search/label/Globo" target="_blank"><span style="color: cyan;">Globo thread</span></a> </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
CEO gone.</div>
<div style="text-align: justify;">
CFO gone. </div>
<div style="text-align: justify;">
COO's palm to forehead ... thwack ... and suspended. </div>
<div style="text-align: justify;">
CEO sold as much of his stock as possible. </div>
<div style="text-align: justify;">
Joint broker, Canaccord resigned with immediate effect. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Major questions for Grant Thornton the auditor and RBC Capital Markets the Nomad.</div>
<div style="text-align: justify;">
And who bought the CEO's 42 million shares? </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnPtQRt76ONTyEkTbnevM1p5VIghuUcYKBmncIPf94AOKwt3d_gyY5Xm4D8XKzZFSVZKuG_OGYSKp6vSPGitZgt1QM_azAUXhzsNtGmOILMbtS69f4Rl8WZR9sKba4nSa_F8DnFJk8hlo/s1600/Fraud.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnPtQRt76ONTyEkTbnevM1p5VIghuUcYKBmncIPf94AOKwt3d_gyY5Xm4D8XKzZFSVZKuG_OGYSKp6vSPGitZgt1QM_azAUXhzsNtGmOILMbtS69f4Rl8WZR9sKba4nSa_F8DnFJk8hlo/s400/Fraud.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">GBO - it's all over<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer: The information, discussions
or topics referred to on this blog should in no way be considered “advice” to
buy or sell anything. The information which may be referred to is freely
available in the public domain and where required the source of information is
referenced to for verification. While every effort has been made to ensure the
veracity of any information contained within this blog, the author accepts no
responsibility for the accuracy of any information contained within this blog or
for the sources of information which may be referred to. Readers are
responsible for their own actions and interpretation of the information
contained within this blog. </span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com0tag:blogger.com,1999:blog-9008707982090470413.post-19300541140443714302015-10-19T01:21:00.000-07:002015-10-19T01:21:01.423-07:00Dialight (DIA) ... more expensive than you think?<div style="text-align: right;">
<span style="font-family: inherit;">Monday 19th October 2015</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Dialight has defied gravity of late. I wonder if buyers </span>realize<span style="font-family: inherit;"> how expensive it likely is. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Bloomberg consensus earnings expectations for full year 2015 are set at 21.7p per share. That would suggest DIA trades on a relatively pricey 32x this year's earnings. But it's likely no where near that cheap. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Firstly, as I have highlighted prior (<a href="http://www.lordshipstrading.blogspot.co.uk/search/label/Dialight" target="_blank"><span style="color: cyan;">Dialight - three years in a row</span></a>), a 21.7p outturn would require that Dialight's second half earnings performance is more than 3x improved upon what it reported in the first half of 2015. In H1 2015 it only managed 5.4p per share of earnings, down 63% from H1 2014. A 21.7p full year performance would mean 16.3p of earnings in H2 2015 to meet consensus. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">But there's more ...</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">That Bloomberg consensus forecast is </span>calculated<span style="font-family: inherit;"> from the mean of submissions by six analysts. However, two of these are seemingly significant outliers. They are so hopeful, that they expect full year 2015 earnings to be north of 30p per share! </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">30p full year earnings would require a miraculous bounce in Dialight's performance from a 63% YOY earnings <i>contraction</i> in H1 2015 to 12% YOY <i>growth</i> in H2 2015. This seems unlikely. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">I reckon full year earnings will be 12p per share at very best, and that DIA is on course for a 45% miss. But my view is neither here nor there. What seems more likely is that the two outliers in the consensus will have to significantly cut their forecasts, which I reckon would bring consensus down to c. 17.6p. Even though I reckon 17.6p would still likely be overoptimistic, what it would mean is that DIA is not on a relatively pricey 32x earnings, it's probably on 40x. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">I note the outliers are also considerably more optimistic for 2016 forecasts as compared to their fellow analysts.</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihtmWL-NKGc_5zZEq1nlFaVxbWYWXxwOkQIYRp6GqUWXLid4MYZNupZg6FIdG0fiJUskVFcHO9zKhJ_41njD_Yok5CZtq5vY1U3dpn2mwooLl1YfEeIn3Dny7ujc5R16DJHCDPQ0Gk_78/s1600/DIA+2015+cons.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihtmWL-NKGc_5zZEq1nlFaVxbWYWXxwOkQIYRp6GqUWXLid4MYZNupZg6FIdG0fiJUskVFcHO9zKhJ_41njD_Yok5CZtq5vY1U3dpn2mwooLl1YfEeIn3Dny7ujc5R16DJHCDPQ0Gk_78/s400/DIA+2015+cons.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight 2015 and 2016 consensus earnings per share breakdown<br />Two outliers to the upside<br /><i>Source: Bloomberg</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyPHcS4_R6Rs5XvhOjSOMvci0aj5h22H5A6PoBYNX-Omn6LO3jXNGNwBWaUQFirxRhz6B6NrxNtLicnbx-Is3IH4E9URuVXObbQefip2G05Z5gX2ScKYaPF7HuY4xqt42GoyEW4iYGKs0/s1600/DIA+2015+Oct+share+price.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyPHcS4_R6Rs5XvhOjSOMvci0aj5h22H5A6PoBYNX-Omn6LO3jXNGNwBWaUQFirxRhz6B6NrxNtLicnbx-Is3IH4E9URuVXObbQefip2G05Z5gX2ScKYaPF7HuY4xqt42GoyEW4iYGKs0/s400/DIA+2015+Oct+share+price.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight share price<br /><i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com3tag:blogger.com,1999:blog-9008707982090470413.post-35227108597885087082015-09-16T06:38:00.000-07:002015-09-16T06:52:11.073-07:00Rocket Internet (RKET GY) ... enough to put you off your dinner<div style="text-align: right;">
<span style="font-family: inherit;">16th September 2015</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Below is a link by <a href="http://www.livemint.com/">www.livemint.com</a>, to a riveting read on Rocket's Foodpanda business in India. It's a real page-scroller with claims of dodgy cupcake orders, related party transactions, ghost restaurants and shambolic controls. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><a href="http://www.livemint.com/Companies/rYKC6HjnShogjE62jO5lpK/The-trouble-with-Foodpanda.html" target="_blank"><span style="color: cyan; font-size: large;">The trouble with Foodpanda</span></a></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Sunny Goel seems to be on Foodpanda India's most wanted list. Most wanted for reportedly setting up 70 fake restaurants. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">If I was an investor in Rocket, it would be enough to put me off my Foodpanda order. Fortunately, I am short. </span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Incidentally, according to Rocket's 2014 report, Foodpanda racked up an impressive €6.7 million in revenue and a €38.5 million EBITDA loss during 2014. Which is </span>obviously<span style="font-family: inherit;"> why it</span><i style="font-family: inherit;"> </i><span style="font-family: inherit;">was reportedly valued at €403.8 million, with Rocket's share being 52.1% or €210.5 million. Hmm ....</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNPEppFOiWiXJGI1r8mwYlNCZDntQvwEpAIK1Fn-wbwv-aS5KW80U_f2EDuXk-Pgyx1fhHi1ESh2nV4wz92Lx-IUQS_SuhtW3J4oL-FISTzyk6xMCg1s_psd_MKa5YAcEltATiW3LuhFk/s1600/Foodpanda.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="250" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNPEppFOiWiXJGI1r8mwYlNCZDntQvwEpAIK1Fn-wbwv-aS5KW80U_f2EDuXk-Pgyx1fhHi1ESh2nV4wz92Lx-IUQS_SuhtW3J4oL-FISTzyk6xMCg1s_psd_MKa5YAcEltATiW3LuhFk/s400/Foodpanda.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Foodpanda valuation<br />
<i>Source: Rocket Internet 2014 annual report</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com0tag:blogger.com,1999:blog-9008707982090470413.post-36221926416891676332015-09-08T08:59:00.000-07:002015-09-08T08:59:09.729-07:00HSS Hire Group (HSS) ... stone cold<div style="text-align: right;">
8th September 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
I've struggled to get much in the way of borrow in HSS Hire Group (HSS), the tool and equipment rental company, capitalised at £100 million. This is a pity, as barring a perfunctory dead cat bounce as the suckers pile in, I've convinced myself it's heading considerably lower. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Any chancers on the long tack may possibly be tempted by its 73% precipitous price decline over the period since its IPO in February last. Yes, February this year! They may even hope some spendthrift will come sniffing to take it private. However, private equity is typically pretty shrewd. And besides, they (in this case Exponent Private Equity LLP) just dumped what they could of the company on the hapless institutions seven months ago, at over three times the current price. I very much doubt they want it back. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Back in February, the IPO offer price was set at 210p per share - at the very bottom of the mooted price range of 210p to 262p per share. Further, the offer raised gross proceeds of £103 million, of which according to its prospectus, up to £13.5 million was earmarked for <i>"underwriting commissions, fees and expenses incurred in connection with the Offer."</i> A bottom of the range float price, and what looks to be hefty fees lined up in getting the float away, should have set alarm bells ringing at the time. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
At first glance of the balance sheet, one may consider it presents value. Net assets were reported to be £159 million from the H1 2015 interims to 27 June 2015. Hence, it currently trades at a 44% discount to NAV. However, strip away the £179 million in intangible assets leaves <u>negative</u> tangible assets of £21 million. It may well be wise to disregard the intangibles as according to the group's prospectus:</div>
<div style="text-align: justify;">
<br /></div>
<blockquote class="tr_bq" style="text-align: justify;">
<span style="color: #cccccc;"><i>"A significant part of the goodwill and indefinite life intangibles, £162,376,000, relates to the Acquisition of the business by Exponent on 25 October 2012, and has not been impaired since Acquisition."</i></span></blockquote>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Given the fact that the group has reported cumulative losses before tax of £44 million since 2011, including most recently a loss before tax of £14.1 million during H1 2015, it is indeed probably wise to discount the goodwill. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The group also has a less than distinguished record of free cash flow. While operating cash flow appears reasonable pre purchase of hire equipment, by the time the group has forked out for its essential annual tally of such equipment, not to mention high debt service costs, little is left in the way of free cash. I calculate that since 2011, the group has reported a cumulative free cash <u>outflow</u> of £67 million. This is inclusive of a £47 million free cash outflow in H1 2015, when the group reported an operating cash inflow of £17.2 million, less £42.7 million in purchase of hire equipment, less £12.3 million in net interest cost, less £1.1 million in tax cost, less £7.9 million in purchases of non-hire property, plant and equipment and software.<br />
<br />
Net debt at the 27 June 2015 half year stage totaled £197 million, a decrease from £317 million as at 27 December 2014. However, this decline was principally driven by some of the proceeds from the IPO and a conversion of investor (Exponent Private Equity LLP) loan notes into ordinaries.<br />
<br />
Despite this, net debt still remains relatively high at 3.8x 2014 EBITDA; peers in the sector such as Speedy Hire (SDY), Ashtead (AHT), Northgate (NTG) are all on 1.9x or less.<br />
<br />
The recent interims highlight a precarious cash position of just £4 million, although this is seemingly only as a result of a £9 million overdraft facility. Most worrisome, the interims further highlight that total remaining undrawn committed borrowing facilities stood at £17.6 million as at 28 June 2015, which was down by £20.1 million from £37.7 million as at 27 December 2014. At that rate one could be forgiven for concluding that total facilities available will be de minimis by year end.<br />
<br />
The remaining debt may well have some duration to maturity, but given the minimal headroom left, the already relatively high net debt to EBITDA ratio, and the fact that the tangible assets are seemingly already spoken for as security for the existing debt, one wonders if further debt will be forthcoming.<br />
<br />
If not further debt, then HSS looks like it's in dire need of an equity issue assuming anyone is content to rescue it. And when considering that HSS has already gone through four owners during the decade past - 3i (2004), Perry Capital/Och-Ziff (2007), Exponent (2012), the hapless institutions (2015) - the chances of a fifth controller seem high. <br />
<br />
With what little borrow I've secured, I've sold short at 60p/shr, looking to close at sub 10p. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVlvonLY03U6ZwJCotHo7W552z1liz9hQNpcMTHIuLkDEnJXnznzS-sXyil_XmWqlIYW1owTbH5kRkK5yy5yoFBtgAHF-uOBS6LmUTLRRIgG-5jMExpAKwqu3hvb6RStpJGW4MYfICe-4/s1600/Share+price.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVlvonLY03U6ZwJCotHo7W552z1liz9hQNpcMTHIuLkDEnJXnznzS-sXyil_XmWqlIYW1owTbH5kRkK5yy5yoFBtgAHF-uOBS6LmUTLRRIgG-5jMExpAKwqu3hvb6RStpJGW4MYfICe-4/s400/Share+price.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">HSS share price<br /><i>Source: Bloomberg</i></td></tr>
</tbody></table>
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-26471450760252546842015-08-17T07:31:00.002-07:002015-09-03T03:03:40.481-07:00Zalando (ZAL GY) ... H1 prompts further observations<div style="text-align: right;">
Monday 17th August 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Zalando (ZAL GY), currently capitalized at €7.9 billion, last week reported its half year performance to 30th June 2015. This is a follow-up to a prior post on <a href="http://www.lordshipstrading.blogspot.co.uk/2015/08/zalando-zal-gy-five-observations.html" target="_blank"><span style="color: cyan;">five observations</span></a>. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Here are some further observations ...</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
As I understand matters, in late 2014 the group decided to extend its practice of invoice billing. Zalando indicates that this is <i>"... a popular payment method in several countries, e.g., DACH, Benelux and Nordics, driving customer satisfaction and check-out conversion."</i><br />
<br />
The customer takes receipt of their package of clothing, shoes, onesie, etc, accompanied by a bill requesting that they settle payment due within a certain period. According to Zalando it is 14 days to pay in Germany; mail order's buy now - pay later.<br />
<br />
Apparently, Zalando has an algorithm for weeding out worthy <strike>buy now - pay later</strike> invoice billing customer types, which historically has proven to be <i>"... robust, successfully limiting risk."</i> Then - as already mentioned - in late 2014 it extended the invoice billing offer to capture new customers. Low and behold, this together with a rise in systemic fraud resulted in an increase in bad debt, which largely occurred in Q1 2015.<br />
<br />
Trade receivables totaling €18.5 million were seemingly written off.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUuBqDyKTbL7gcGMzLylQ9y4qSA5oNgRb2O50-eKQqhWdLPOEotDiTReb0yha21eEPr1MCUBf22U2GK3tP7ZO09aVSaQ07REVmThIyDpVYbS5lxsfrQ-_5_kZSVVfjy-rgUhug_QK_9cU/s1600/ZAL+trade+receivables+written+down.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="153" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUuBqDyKTbL7gcGMzLylQ9y4qSA5oNgRb2O50-eKQqhWdLPOEotDiTReb0yha21eEPr1MCUBf22U2GK3tP7ZO09aVSaQ07REVmThIyDpVYbS5lxsfrQ-_5_kZSVVfjy-rgUhug_QK_9cU/s400/ZAL+trade+receivables+written+down.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando write down of trade receivables<br />
<i>Source: Zalando H1 2015 report</i></td></tr>
</tbody></table>
This would appear to have knocked c. 2.3 percentage points from the Zalando's adjusted EBIT margin.<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqzgH-_zsiIanPPTxqLlDsUxVp_E7H8yahpkW6dY8f1lL2KZESQ2A1Fuj_6ifB6_m7mYwf9itwg973eGpW7kUGWiht1tUZgkNReg5pEUCTOUkaBiWHRhyphenhyphen6YqzjI0cFoWqpgrs27r_nX0E/s1600/ZAL+impact+on+EBIT+margin.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="98" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqzgH-_zsiIanPPTxqLlDsUxVp_E7H8yahpkW6dY8f1lL2KZESQ2A1Fuj_6ifB6_m7mYwf9itwg973eGpW7kUGWiht1tUZgkNReg5pEUCTOUkaBiWHRhyphenhyphen6YqzjI0cFoWqpgrs27r_nX0E/s400/ZAL+impact+on+EBIT+margin.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Impact of receivables write down on group margin<br />
<i>Source: Zalanda H1 2015 report</i></td></tr>
</tbody></table>
<br />
Several points may wish to be considered:<br />
<br />
<h3>
<span style="color: red;">1. The chickens are coming home to roost</span></h3>
<br />
One has to wonder what Zalando expected as a result of loosening whatever qualifying conditions were required in order to extend invoice billing. You hand over your goods on an IOU, you takes your chances.<br />
<br />
<h3>
<span style="color: red;">2. Quality of sales is vital on wafer thin margins</span></h3>
<br />
While in the context of €1,377 million of H1 2015 sales an €18.5 million write down is relatively small, it is still c. 5.6% of the incremental €329.5 million increase in sales as compared to H1 2014 sales of €1,047 million. Further still, as profit margins are thin, it has a significant impact. Ex the receivables write down, EBIT would have been 36% higher in H1 2015.<br />
<br />
<h3>
<span style="color: red;">3. Does the maths stack up?</span></h3>
<br />
I may well be wrong here but the numbers provided by Zalando in its presentation are somewhat unclear.<br />
<br />
As highlighted in the receivables write-off above. €18.5 million was:<br />
<br />
<blockquote class="tr_bq">
<span style="color: #cccccc;">"... recorded as an expense in the second quarter of 2015 in line with IAS 8 as a change in estimates. Those changes in estimates relate predominantly to trade receivables originating from the first quarter of 2015."</span></blockquote>
<br />
The group then goes on to highlight that:<br />
<br />
<blockquote class="tr_bq">
<span style="color: #cccccc;">"In the second quarter of 2015, Zalando generated adjusted EBIT of EUR 30.2m (prior year: EUR 35.1m). This decrease of 2.3 percentage points in the adjusted EBIT margin from 6.4% in the second quarter 2014, to 4.1% in the second quarter 2015 is due to the afore-mentioned increase in payment costs offsetting the fundamentally strong operating performance of the business."</span> </blockquote>
<br />
So as I understand matters, €18.5 million was expensed in Q2 2015, and without this adjusted EBIT would have been €18.5 million higher at €48.7 million (€30.2 million + €18.5 million), so the adjusted margin would have been 2.3 percentage points higher at 6.4% as compared to the out-turn of 4.1%.<br />
<br />
Q2 2015 sales were reported to be €733 million.<br />
<br />
Adjusted EBIT of €30.2 million = an adjusted 4.1% EBIT margin, which tallies up as reported.<br />
<br />
However, if adjusted EBIT was higher by €18.5 million (due to the impact of the receivables write down) and this was equivalent to an adjusted EBIT margin of 6.4%, then ...<br />
<br />
An adjusted EBIT margin of 6.4% on adjusted EBIT of €48.7 million = implied sales of €761 million.<br />
<br />
I.e. sales would have been €28 million higher.<br />
<br />
I may indeed have my maths wrong on this or there may be rounding errors involved so any light on this would be welcomed.<br />
<br />
<h3>
<span style="color: red;">4. What does this say for some of the businesses in Rocket's portfolio?</span></h3>
<br />
If Zalando is experiencing <i>"unexpected systematic fraud"</i> in those bastions of online shopping rectitude being Germany, Austria, Switzerland, Benelux and the Nordics, then what are the chances of systematic fraud for Rocket's Zalora operating in Thailand, Indonesia, Philippines, etc? Or Rocket's Dafiti operating in Brazil, Argentina, Chile, Colombia, and Mexico? Or Rocket's Lamoda operating in Russia, Kazakhstan, and Ukraine?<br />
<br />
Rocket's Jumia/Zando business operating in Nigeria, Cameroon, Ghana, Uganda, Ivory Coast etc, is probably a safe bet. This is especially as the majority of its c. €62 million of 2014 sales would likely have been settled by cash on delivery in a market where according to Rocket itself <i>"... approximately 80% of the population does not have a bank account to overcome fears of internet fraud."</i><br />
<br />
<br />
<h3>
<span style="color: red;">And another thing ... </span></h3>
<h3>
<span style="color: red;">The company is seemingly awash with cash and yet ...</span></h3>
<br />
Zalando reported €974 million in cash and cash equivalents to 30th June 2015. Cash and cash equivalents decreased in the period by €77.4 million, the main driver indicated to be due to investment of funds into term deposits.<br />
<br />
Here is the group's condensed statement of cash flows and accompanying text.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiweFGk6754XFQUESZTZV5zbIHB9bxHVTieDv4pyjjqehk327pbsWgew_69XqX_cXIYUQzyrCav3I8kmCuu2dhBEsJcM9g9cQNPiM6Z2C373Y5lIMB6EsujBXYAmVn7uzg3TSinVzU4xxo/s1600/Cash+statement.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiweFGk6754XFQUESZTZV5zbIHB9bxHVTieDv4pyjjqehk327pbsWgew_69XqX_cXIYUQzyrCav3I8kmCuu2dhBEsJcM9g9cQNPiM6Z2C373Y5lIMB6EsujBXYAmVn7uzg3TSinVzU4xxo/s400/Cash+statement.jpg" width="346" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando H1 2015 condensed statement of cash flows<br />
<i>Source: Zalando H1 2015 report</i></td></tr>
</tbody></table>
</div>
<div style="text-align: justify;">
Here is the group's fuller cash flow statement from H1 2015<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNDXmXhq0SYvVjD6Y5zCCH8ZenLalDtt8g9RJYX-TFy-6NayI5LRM2EMg3VgF_oot-BDENvBwVeXnu6gTZjb3j0hcAgcrcYA8bSnf67o9hmP3gDHmPVeS5GXn7haHJe7Kiq4KvH3Ev3HA/s1600/Cash+flow.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNDXmXhq0SYvVjD6Y5zCCH8ZenLalDtt8g9RJYX-TFy-6NayI5LRM2EMg3VgF_oot-BDENvBwVeXnu6gTZjb3j0hcAgcrcYA8bSnf67o9hmP3gDHmPVeS5GXn7haHJe7Kiq4KvH3Ev3HA/s400/Cash+flow.jpg" width="303" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando H1 2015 cash flow statement<br />
<i>Source: Zalando H1 2015 report</i></td></tr>
</tbody></table>
And here is the group's discussion on the movement in its current liabilities.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJ53CQLOHItxGtcrvC4ztEXajnF1qKSIioReXyDvFL6soi8JXLrll1h6AVcorKfSTYrFZlKPh1-dnH-fttQEssm4L18p2cXJb_ON6i16MojH9arKmTQR6SDioaPKaAC0yxD29fEpdxi6o/s1600/Payables.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="236" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJ53CQLOHItxGtcrvC4ztEXajnF1qKSIioReXyDvFL6soi8JXLrll1h6AVcorKfSTYrFZlKPh1-dnH-fttQEssm4L18p2cXJb_ON6i16MojH9arKmTQR6SDioaPKaAC0yxD29fEpdxi6o/s400/Payables.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Increase in liabilities<br />
<i>Source: Zalando H1 2015 report</i></td></tr>
</tbody></table>
A few items to note.<br />
<br />
<ol>
<li>In the accompanying text to the condensed statement of cash flows, Zalando points to positive cash flow from operating activities which had <i>"... mainly been achieved through longer payment terms with suppliers."</i></li>
<li>As per the cash flow statement, there was a €78.2 million cash inflow attributable to increased trade payables in H1 2015. As highlighted above, this was seemingly a principal driver of the €23.3 million in total operating cash inflow during the same period. </li>
<li>The cash flow statement shows that total cash outflow into <i>"investments in term deposits"</i> totaled €110 million in H1 2015.</li>
<li>The group again highlights in its discussion on movements in current liabilities, that trade payables rose <i>"... from deliveries of goods and was achieved through longer payment terms with suppliers."</i></li>
<li>It also indicates that <i>"Under reverse factoring agreements, selected suppliers transferred their receivables due from Zalando totalling €128.2m to a factor as of June 30, 2015 (prior year: €90.5m)."</i></li>
</ol>
I'd highlighted the group's use of reverse factoring agreements in my prior post and these arrangements would appear to be forming an increasing proportion of its trade payables and similar liabilities.<br />
<br />
In fact, according to Zalando's accounts, its trade payables and similar liabilities have risen as follows:<br />
<br />
<ul>
<li>2013: €410 million</li>
<li>2014: €492 million</li>
<li>H1 2015: €569 million</li>
</ul>
<br />
Meanwhile, the group's use of reverse factoring (included in its reported trade payables and similar liabilities) has risen as follows:<br />
<br />
<ul>
<li>2013: €38 million</li>
<li>2014: €91 million</li>
<li>H1 2015: €128 million</li>
</ul>
<br />
Hence, reverse factoring liabilities as a percentage of trade payables and similar liabilities have risen as follows:<br />
<br />
<ul>
<li>2013: 9%</li>
<li>2014: 18%</li>
<li>H1 2015: 23% </li>
</ul>
<br />
One possible interpretation of what is occurring is that Zalando is using a third party financier to settle an increasing proportion of its trade payables. Presumably the third party financier is paying a supplier (or suppliers) to Zalando on the date due and Zalando pays the third party financier at a later date.<br />
<br />
If this is the case, then it looks increasingly like this reverse factoring arrangement is akin to a loan, benefiting Zalando.<br />
<br />
Assuming this interpretation to be correct, then one could be forgiven for thinking it slightly strange. Especially as Zalando would appear to be awash with cash, so much so that it is having to shove increasing amounts into term deposits.<br />
<br />
Of course, the upshot of all this is that Zalando's operating cash and free cash flow is materially boosted, while investing cash flows out.<br />
<br />
I am short Zalando.<br />
<br />
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com5tag:blogger.com,1999:blog-9008707982090470413.post-24474525632080365862015-08-11T08:04:00.000-07:002015-08-17T08:06:33.140-07:00Zalando (ZAL GY) ... five observations<div style="text-align: justify;">
<div style="text-align: right;">
<span style="font-family: inherit;">Tuesday 11th August 2015</span></div>
</div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Zalando (ZAL GY, mkt cap €7.7 billion), arrived on the Frankfurt stock exchange in October 2014. Founded in 2008, Zalando is an online clothing, shoes and accessories company. </span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">It is seemingly very much alike to UK listed ASOS (ASC LN, mkt cap £2.8 billion). However, whereas it took ASOS sixteen years to arrive at £1 billion in sales, Zalando, marked its €1 billion sales card in under four years, and went on to double this within the next two years through to 2014. </span><br />
<span style="font-family: inherit;"><br /></span>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLVUQssfqU3IlEkYS7ZbeRj_jKqvPfMe-cxS3ZKI7EBJtrJF8o2cySjsuXRUA01Zrnl__zFE-FsTJLpOSC9FVww3AeFr_uEuzWMflYudNeZu5SgX3zsYGO5THKiRQd8ZocJgFPel1z-r0/s1600/Share+price+update.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLVUQssfqU3IlEkYS7ZbeRj_jKqvPfMe-cxS3ZKI7EBJtrJF8o2cySjsuXRUA01Zrnl__zFE-FsTJLpOSC9FVww3AeFr_uEuzWMflYudNeZu5SgX3zsYGO5THKiRQd8ZocJgFPel1z-r0/s400/Share+price+update.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando - share price<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">Zalando was founded by the same team behind Rocket Internet (RKET GY, mkt cap €5.4 billion) and each of these promotions (ZAL & RKET) largely share the same major holders on their registers. Indeed in late 2013, Rocket Internet sold and transferred nearly its entire stake in Zalando, to its then existing shareholders, which included the Global Founders and affiliates of Kinnevik (KINVB SS, mkt cap SEK 76 billion). The Zalando spin-off. </span><br />
<span style="font-family: inherit;"><br /></span>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPpKjg5CPnUiJ6avra_npxDmRRzWyLloIt7T216-wbSR0AC7p1bKtno1YsNmLZKCQf0VDhncN9JOH3O9FM18LgUJGGnTEfFQaHFvzIeppHN3bMhgSd9YBkGPku8m4xpZFuejbUs2nqHOk/s1600/Zalando+spin+off.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="121" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPpKjg5CPnUiJ6avra_npxDmRRzWyLloIt7T216-wbSR0AC7p1bKtno1YsNmLZKCQf0VDhncN9JOH3O9FM18LgUJGGnTEfFQaHFvzIeppHN3bMhgSd9YBkGPku8m4xpZFuejbUs2nqHOk/s400/Zalando+spin+off.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The Zalando spin-off by Rocket<br />
<i>Source: Rocket Internet prospectus</i></td></tr>
</tbody></table>
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
The brief background over, here are 5 observations which prompted me to open a short:<br />
<br />
<h3>
<span style="color: red;">1. Astounding operational leverage</span></h3>
<br />
The phenomenal growth in revenue in such a relatively short period of time aside, on my estimates:<br />
<br />
Zalando reported a €59 million EBIT loss in 2011, followed by an €84 million EBIT loss in 2012, then a €114 million EBIT loss in 2013. The group then reported a €62 million EBIT profit in 2014, the year of its IPO. This is an astounding €176 million swing in one year. </div>
<div style="text-align: justify;">
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdQjXDjy3qNzOiwofDJ8qNwVfLOpVnG23vocFjfA4lvjjkiN_KtI7F7JETl1528Xjb31MwuG1Kw2xlfYZNNhhyNxhp3DUMFpMEOTtDF7DeNY0EQuEfrySmDoxI3kUyrXDa3PsRZP_AevA/s1600/Zalando+revenue.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdQjXDjy3qNzOiwofDJ8qNwVfLOpVnG23vocFjfA4lvjjkiN_KtI7F7JETl1528Xjb31MwuG1Kw2xlfYZNNhhyNxhp3DUMFpMEOTtDF7DeNY0EQuEfrySmDoxI3kUyrXDa3PsRZP_AevA/s400/Zalando+revenue.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando revenue, € million<br />
<i>Source: Zalando prospectus and accounts</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs7srkU4E9_gp7pWxbOFHzkcXFE7uDghM9KEK54Po7C_l0CWWtMr6bEZd00vLBdAXFTW7Ad1Sjbukwpe5fPmgviaOiTEUY1ih5yMkkse0d9krqpM6RMAPCte5ErnPbo0NWFJly9P9IhqI/s1600/Zalando+EBIT.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs7srkU4E9_gp7pWxbOFHzkcXFE7uDghM9KEK54Po7C_l0CWWtMr6bEZd00vLBdAXFTW7Ad1Sjbukwpe5fPmgviaOiTEUY1ih5yMkkse0d9krqpM6RMAPCte5ErnPbo0NWFJly9P9IhqI/s400/Zalando+EBIT.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando EBIT, € million<br />
<i>Source: My estimates from Zalando prospectus and accounts</i></td></tr>
</tbody></table>
<br />
As shown in the above charts, Zalando's revenue rose by €452 million in 2014, to €2,214 million. This €452 million increase in revenue was accompanied by the fore-mentioned €176 million swing in EBIT. <br />
<br />
The operating leverage is especially strong when considering that €274 million, or 61% of the increase in sales came from outside DACH (Germany, Austria, Switzerland), where - one presumes - greater distribution and marketing costs would have been incurred.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilJ3TeEPF17IVIRuCw7ExleKwyysApJZHqSEYBugp40KqlRg-agn-TLwFWmp6t5TTNx6RWAYmafodZ_ockoUVnjUfUCY8_SrXYZVHTrRufGCHsn9KPEJZ-WgE0mkfyVANxFUEfJcV5a6A/s1600/Zalando+segment+reporting.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilJ3TeEPF17IVIRuCw7ExleKwyysApJZHqSEYBugp40KqlRg-agn-TLwFWmp6t5TTNx6RWAYmafodZ_ockoUVnjUfUCY8_SrXYZVHTrRufGCHsn9KPEJZ-WgE0mkfyVANxFUEfJcV5a6A/s1600/Zalando+segment+reporting.jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando segment reporting - 2013-14<br />
<i>Source: Zalando annual report</i></td></tr>
</tbody></table>
<br />
<h3>
<span style="color: red;">2. Recent trends in site visits</span></h3>
<br />
With the use of <a href="http://www.similarweb.com/" target="_blank"><span style="color: cyan;">Similarweb.com</span></a>, a web traffic data analytic site, I've monitored the monthly desktop visits to Zalando's country* sites as estimated by Similarweb, during the period September 2014 to July 2015.<br />
<span style="font-size: x-small;">* zalando.de, zalando.fr, zalando.nl, zalando.pl, zalando.it, zalando.be, zalando.co.uk, zalando.es, zalando.ch, zalando.se</span><br />
<br />
These estimates by Similarweb appear to show that while total monthly site visits rose in the period September 2014 to a peak in January 2015, they have fallen sharply since. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcERrBH1IxTi9R_vog5O1pbkZnxzD3lB3kgUhDtVM1jairHYGMaG1usD38JinTBNWi_qwBqkSm0THU3-I5UwrM7kdOAa7UUwH9_R4-ZHuYUdA6N7xdKiPDzE0uedIGj3kIl7o0MvMK_Ms/s1600/Zalando+site+traffic.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcERrBH1IxTi9R_vog5O1pbkZnxzD3lB3kgUhDtVM1jairHYGMaG1usD38JinTBNWi_qwBqkSm0THU3-I5UwrM7kdOAa7UUwH9_R4-ZHuYUdA6N7xdKiPDzE0uedIGj3kIl7o0MvMK_Ms/s400/Zalando+site+traffic.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalando total monthly site visits according to www.similarweb.com<br />
The total includes combined visits to the sites: zalando.de, zalando.fr, zalando.nl, <br />
zalando.pl, zalando.it, zalando.be, zalando.co.uk, zalando.es, zalando.ch, zalando.se<br />
<i>Source: www.similarweb.com</i></td></tr>
</tbody></table>
<br />
A few things to consider:<br />
<br />
<ol>
<li>I cannot qualify the accuracy of Similarweb's estimates.</li>
<li>There may well be some seasonal influence on monthly site visits, notably greater visits in the run up to Christmas and the January sales. </li>
</ol>
<br />
However, using the same source (Similarweb) here is the trend of monthly desktop site visits to the ASOS sites^.<br />
<span style="font-size: x-small;">^ asos.com, asos.de, asos.fr, us.asos.com</span><br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZDjHNyxfh-VWnC8KYWqCNswL98qlqz4k-Kst6NQPINf7HOcBiW_9TRZyhrWvDTN3NFLukeZugipGpKLEk14TA_K-cVRaAvJasXWhZxjZukbs-HjT5d9yO7YAFXK1CPzBCD342E2iYmRQ/s1600/ASOS+site+traffic.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="222" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZDjHNyxfh-VWnC8KYWqCNswL98qlqz4k-Kst6NQPINf7HOcBiW_9TRZyhrWvDTN3NFLukeZugipGpKLEk14TA_K-cVRaAvJasXWhZxjZukbs-HjT5d9yO7YAFXK1CPzBCD342E2iYmRQ/s400/ASOS+site+traffic.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Asos total monthly site visits according to www.similarweb.com<br />
The total includes combined visits to the sites: asos.com, asos.de, asos.fr, us.asos.com<br />
<i>Source: www.similarweb.com</i></td></tr>
</tbody></table>
<br />
As can be seen - presumably under the same methodology - whereas Similarweb's estimates show a sizeable decline in Zalando's monthly site traffic since September 2014, there has been a significant increase in monthly site traffic to ASOS's sites.<br />
<br />
Further, the monthly site traffic to ASOS's sites would appear to have risen even though there may be seasonal headwinds.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpT_Wg32xHiBV0n52Pa3JLt78HsCDZR8nKbrsmq16QZdo-ocbHPQeq78OcsN7SeM747XX0-lkzXLNhCb-U8mlJp8MNRsPGzgu5NyO2CTERnFEv83FJAKt9s-LSdGZY3Ko7ROnjStqOa5w/s1600/ZAL+and+ASC+site+traffic.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="222" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpT_Wg32xHiBV0n52Pa3JLt78HsCDZR8nKbrsmq16QZdo-ocbHPQeq78OcsN7SeM747XX0-lkzXLNhCb-U8mlJp8MNRsPGzgu5NyO2CTERnFEv83FJAKt9s-LSdGZY3Ko7ROnjStqOa5w/s400/ZAL+and+ASC+site+traffic.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Zalando and ASOS monthly site visits according to www.similarweb.com<br />The total includes combined visits to the sites: zalando.de, zalando.fr, zalando.nl,<br />zalando.pl, zalando.it, zalando.be, zalando.co.uk, zalando.es, zalando.ch, zalando.se<br />and<br />asos.com, asos.de, asos.fr, us.asos.com<br /><i>Source: www.similarweb.com</i></span></td></tr>
</tbody></table>
<br />
In fact, Similarweb's estimates suggest that monthly traffic to Zalando's sites has fallen by 16% on July 2015's data as compared to September 2014's count. This compares to a 32% increase in monthly traffic to ASOS's sites on the same basis. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCmFR_xpN_ZMT4GEVQzkszOee055Q1SKQcrJOlWLR41__WaQH5dvf8SHCclA9iu4MVcdpLF92RIgsEgpkAvL329PN8sjRdvtuzxeFGf2YABek85xRdxK3U2Ry8ofrKffGdUkjc8lcOZzo/s1600/Total+percentage+traffic+increase.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCmFR_xpN_ZMT4GEVQzkszOee055Q1SKQcrJOlWLR41__WaQH5dvf8SHCclA9iu4MVcdpLF92RIgsEgpkAvL329PN8sjRdvtuzxeFGf2YABek85xRdxK3U2Ry8ofrKffGdUkjc8lcOZzo/s400/Total+percentage+traffic+increase.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Zalando and ASOS percentage change in site visits according to www.similarweb.com<br />The total includes combined visits to the sites: zalando.de, zalando.fr, zalando.nl,<br />zalando.pl, zalando.it, zalando.be, zalando.co.uk, zalando.es, zalando.ch, zalando.se<br />and<br />asos.com, asos.de, asos.fr, us.asos.com<br /><i>Source: www.similarweb.com</i></span></td></tr>
</tbody></table>
<br />
Here is Similarweb's data on a country site specific basis.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKBqmhlTyTPCOrhaR5wfmg5Ok808MgvAIXxWWDGJXDoM3M7aMmCSNjIx7wO6CAo7RLt_VkioyeIZYjB5codMPRRVCZ7nZ_mT8-zoH6MOdAs1Ox_P7tVUgQn_vezUCP3LeeCV3lrdFJ85E/s1600/Ind+site+traffic+percentage+increase.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKBqmhlTyTPCOrhaR5wfmg5Ok808MgvAIXxWWDGJXDoM3M7aMmCSNjIx7wO6CAo7RLt_VkioyeIZYjB5codMPRRVCZ7nZ_mT8-zoH6MOdAs1Ox_P7tVUgQn_vezUCP3LeeCV3lrdFJ85E/s400/Ind+site+traffic+percentage+increase.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Zalando and ASOS percentage change in site visits according to www.similarweb.com</span><br />
<span style="font-size: x-small;">Sites: zalando.de, zalando.fr, zalando.nl, </span><br />
<span style="font-size: x-small;">zalando.pl, zalando.it,</span><span style="font-size: x-small;"> </span><span style="font-size: x-small;">zalando.be, zalando.co.uk, zalando.es, zalando.ch, zalando.se</span><br />
<span style="font-size: x-small;">and</span><br />
<span style="font-size: x-small;">asos.com, asos.de, asos.fr, us.asos.com</span><br />
<i style="font-size: small;">Source: www.similarweb.com</i></td></tr>
</tbody></table>
<br />
As a whole, these would not appear to be encouraging trends for Zalando.<br />
<br />
<h3>
<span style="color: red;">3. Reverse factoring</span></h3>
<br />
Zalando would appear to use a third party to engage in reverse factoring; whereby this is likely to mean that the third party will have paid Zalando's suppliers in advance of the normal payment terms. While this is not altogether unusual, nonetheless, there was a marked increase in the value of supplier payables transferred to the factor. These rose from €37.6 million in 2013, to €90.5 million in 2014.<br />
<br />
Reverse factoring can help the buyer to improve the efficiency of its invoice management. But the generosity on the part of the buyer in assisting its suppliers to collect payments early can also come at a price. It can help the buyer to strengthen its terms of contract, which in some cases can result in a discount in its cost of goods. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgF0TnqhMZSL4fyiCTIe1R7vDsLvMOOHawRAXfnkmGCeUisAgBxySzZ8WZut-DvI2vFYPyMgDcYgnKYlAEBxyaqFl4dcZ4ZUf_KsIoYDtDoexooqW_vIoAdGrBjLaYDCJXuZrP7hTg9P7w/s1600/Reverse+factoring.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="203" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgF0TnqhMZSL4fyiCTIe1R7vDsLvMOOHawRAXfnkmGCeUisAgBxySzZ8WZut-DvI2vFYPyMgDcYgnKYlAEBxyaqFl4dcZ4ZUf_KsIoYDtDoexooqW_vIoAdGrBjLaYDCJXuZrP7hTg9P7w/s400/Reverse+factoring.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Increase in reverse factoring during 2014<br />
<i>Source: Zalando 2014 annual report</i></td></tr>
</tbody></table>
<br />
<h3>
<span style="color: red;">4. Increase in related party transactions</span></h3>
<br />
In addition to a rise in reverse factoring, Zalando also reported a not insignificant level of goods purchased from related parties.<br />
<br />
Goods purchased from related parties totaled €75.7 million during 2014, up from just €1.9 million during 2013. However, it should be noted that it is not clear when the party became related during 2013.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEinzrRG2_mMTdIh3B9thtUmJhcniCAweZ4OOegELhZPmj77khkGii73hzUAKKzafoaZK7d9EI5LZArjRTQCJKDZ4a-8CRn226lmdVlNreTwd54Ri6z2KO8g2CMfG0bOzqcaqvzm1PC21KA/s1600/Related+parties.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEinzrRG2_mMTdIh3B9thtUmJhcniCAweZ4OOegELhZPmj77khkGii73hzUAKKzafoaZK7d9EI5LZArjRTQCJKDZ4a-8CRn226lmdVlNreTwd54Ri6z2KO8g2CMfG0bOzqcaqvzm1PC21KA/s400/Related+parties.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Increase in goods purchased from related parties during 2014<br />
<i>Source: Zalando 2014 annual report</i></td></tr>
</tbody></table>
<h3>
<span style="color: red;">And another thing ...</span></h3>
<br />
I've always found insider selling proves a pretty good steer.<br />
<br />
The founders and insiders sold c. €434 million worth of stock in March last.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkLRPo7r51UeibXrenYrY0ya_JoZYt8W7xfXvAj6VLPCQxoS1UJu2klvo_TFhlX14S7MVSEni60hOqE4S9SYl0p8x7X8uxpFplxCJQCuaqzhCXMsrw5D6W5WsMMFvYq-uD9O3O-4l03y4/s1600/Insiders+selling.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkLRPo7r51UeibXrenYrY0ya_JoZYt8W7xfXvAj6VLPCQxoS1UJu2klvo_TFhlX14S7MVSEni60hOqE4S9SYl0p8x7X8uxpFplxCJQCuaqzhCXMsrw5D6W5WsMMFvYq-uD9O3O-4l03y4/s400/Insiders+selling.jpg" width="340" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Key shareholders selling<br />
<i>Source: Bloomberg</i><span style="text-align: justify;"> </span></td></tr>
</tbody></table>
<br />
This was shortly followed by a further €244 million sale of stock by two holders in July last.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlij2shBntOckOIynluaOfQ_GHwEjgt0wSpuaehabiOU1OOcMUrZaX8JSq4KBL9IfJ2hhohXvk_Cb4xMp2_YfSw3LjWJyTE_9xY5cMeiqvW-QjkIsEn3tPkE2w22VP3oFSUcJOR3q7x-8/s1600/July+insiders+value.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="318" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlij2shBntOckOIynluaOfQ_GHwEjgt0wSpuaehabiOU1OOcMUrZaX8JSq4KBL9IfJ2hhohXvk_Cb4xMp2_YfSw3LjWJyTE_9xY5cMeiqvW-QjkIsEn3tPkE2w22VP3oFSUcJOR3q7x-8/s400/July+insiders+value.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Further initial investor selling<br />
<i>Source: Reuters</i></td></tr>
</tbody></table>
I sold short at just shy of €32.<br />
<br />
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer: The information, discussions
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buy or sell anything. The information which may be referred to is freely
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Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com3tag:blogger.com,1999:blog-9008707982090470413.post-39632228007692930772015-08-11T05:21:00.001-07:002015-08-11T06:48:01.201-07:00Optimal Payments (OPAY) ... a gamble in China?<div style="text-align: right;">
Tuesday 11th August 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Pursuant to the latest crackdown (see below) by Chinese authorities on online gambling, I've sold short in OPAY (OPAY LN, mkt cap £1,386 million), the online and mobile payments processor. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg58E2dXLBbikL4QB-tWWV4LpyDEMcD7rK0LB_XsII4SfsCsxEREbduaWKgoRa86NdZ_6ClLYcrjoE0JWSe6P3WSsCJZjfraQHidSPPPDH9HBOjN1BoTLNF6DZln8nJ-BXUJ1NaNQOHrYU/s1600/Crackdown+large.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg58E2dXLBbikL4QB-tWWV4LpyDEMcD7rK0LB_XsII4SfsCsxEREbduaWKgoRa86NdZ_6ClLYcrjoE0JWSe6P3WSsCJZjfraQHidSPPPDH9HBOjN1BoTLNF6DZln8nJ-BXUJ1NaNQOHrYU/s1600/Crackdown+large.jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chinese authorities crack down on online gambling<br />
<i>Source: www.china.org.cn</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br />
As I understand matters, OPAY derives c. 47% of its revenue from online gambling (see below). <br />
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhphYxIbOQvbFAudb-Z1x-xkggNeLFcsYd8G003dwOXdlKN6KsMYcXKFK24xtLfZk89HnCh0fO_MXKtkqq_CrjIuBZt1Shvsu2bALXV3HtbG5P3WubF445nvu2A88ZkJtmHc5ZR0TxcARw/s1600/OPAY+Skrill+online+gambling.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="277" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhphYxIbOQvbFAudb-Z1x-xkggNeLFcsYd8G003dwOXdlKN6KsMYcXKFK24xtLfZk89HnCh0fO_MXKtkqq_CrjIuBZt1Shvsu2bALXV3HtbG5P3WubF445nvu2A88ZkJtmHc5ZR0TxcARw/s400/OPAY+Skrill+online+gambling.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">OPAY presentation on proposed acquisition of Skrill - my red highlight added<br />
<i>Source: OPAY 23rd March 2015</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<br />
Further, that the RoW - which is principally Asia - accounts for c. 32% of the enlarged group's (post Skrill) revenue.<br />
<br /></div>
<div style="text-align: justify;">
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizZcHR9DyC82NXguZ1N8GCO4d30ZwuqsWIAzRqJbMdwUsudbcbEJj9T_XZTbyvH4ac2-DPVAI_Wa-mwOE132_vbFW9AzhEPlH757MEdFpvVMZbV8tV3nBamyK03uE0b4h4oNWzvF0wNN8/s1600/Post+Skrill.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="277" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizZcHR9DyC82NXguZ1N8GCO4d30ZwuqsWIAzRqJbMdwUsudbcbEJj9T_XZTbyvH4ac2-DPVAI_Wa-mwOE132_vbFW9AzhEPlH757MEdFpvVMZbV8tV3nBamyK03uE0b4h4oNWzvF0wNN8/s400/Post+Skrill.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">OPAY presentation on proposed acquisition of Skrill - my red highlight added<br />
<i>Source: OPAY 23rd March 2015</i></td></tr>
</tbody></table>
<br />
Selling short was not a difficult decision to make.<br />
<br />
<h2>
<span style="color: red;">And another thing ...</span></h2>
As can be seen from page 41 of OPAY's March 2015 presentation (above) on its proposed acquisition of Skrill, OPAY highlights that:<br />
<br />
<blockquote class="tr_bq">
<i><span style="color: #cccccc;">"OPAY regards more than 40 countries and territories as "banned" or "non-serviced" including Iran, Iraq, Sudan, Zimbabwe, Libya, Uganda and Yemen and will not support any online gambling related payment transactions in those countries."</span></i> </blockquote>
<br />
This compares to Skrill, which indicates:<br />
<br />
<blockquote class="tr_bq">
<i><span style="color: #cccccc;">"Skrill currently regards more than 60 countries as prohibited, including China, Malaysia, Israel, Iran, North Korea and Turkey and therefore will not support any online gambling related payment transactions in those countries."</span></i></blockquote>
<br />
It's noteworthy that Skrill specifically mentions China as a country where it <i>"... will not support any online gambling related payment transactions ..."</i><br />
<br />
And yet (as highlighted in OPAY's March prospectus below) OPAY has historically derived a significant proportion of its revenue from a single merchant providing services into China. This merchant accounted for 36.7% of OPAY's revenue in 2014. Further, despite Skrill's declared hesitancy towards dealings in China, that it too derived 7% of its 2013 revenue from the same merchant providing services into China.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipBH8zV4yeArcAwixiOl6YXYRe2ctp20poiRb5f94EUP-eN7JdFxJdE1pDCQYwf2lFdr8k8xZBmtV5c-LTGgzbO9Wcov6YFQfK74zsqpSM5wCZ1yljXwzfsSK1tAj9tOZkyXu4jzMmtBU/s1600/Single+merchant.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipBH8zV4yeArcAwixiOl6YXYRe2ctp20poiRb5f94EUP-eN7JdFxJdE1pDCQYwf2lFdr8k8xZBmtV5c-LTGgzbO9Wcov6YFQfK74zsqpSM5wCZ1yljXwzfsSK1tAj9tOZkyXu4jzMmtBU/s640/Single+merchant.jpg" width="428" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">OPAY prospectus from 23rd March 2015<br />
<i>Source: OPAY</i></td></tr>
</tbody></table>
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; font-size: x-small; line-height: 115%;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com0tag:blogger.com,1999:blog-9008707982090470413.post-14622199640478059072015-07-30T06:28:00.001-07:002015-07-30T06:28:47.300-07:00Dialight (DIA) ... three years in a row?<div style="text-align: right;">
Thursday 30th July 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
For the third consecutive year, I reckon Dialight has zero prospect of achieving full year consensus forecasts - even though they have already been sharply reduced on the back of this week's interims. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
And here's why ...</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Bloomberg consensus envisages 8% YOY revenue growth to £173 million (2014: £160 million) for FY 2015. Moreover, consensus projects FY 2015 EBITDA to be £18 million (2014: £22.9 million). This implies a FY 2015 EBITDA margin of 10.4%. </div>
<div style="text-align: justify;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4o5oghk0VRC13TowNbWNyqEobDqFS_b2gpXZxbvXsFXNa8fzDqgcSNXen0L14w0dBMOr68RpIypwozSWzK8nJgKjewfbRVSt94DduGHa0xIvx9PKpA9GR12k4YcD1slKI-CJjKP5WTwI/s1600/DIA+rev+%2526+EBITDA.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="247" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4o5oghk0VRC13TowNbWNyqEobDqFS_b2gpXZxbvXsFXNa8fzDqgcSNXen0L14w0dBMOr68RpIypwozSWzK8nJgKjewfbRVSt94DduGHa0xIvx9PKpA9GR12k4YcD1slKI-CJjKP5WTwI/s400/DIA+rev+%2526+EBITDA.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight: semi-annual revenue and EBITDA <br />and implied H2 2015E revenue and EBITDA from consensus forecast<br /><i>Source: DIA interim and annual reports, Bloomberg consensus</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
When considering the revenue slowdown and the sharp decline in EBITDA margin during H1 2015, then as per usual, this leaves a <i>helluva</i> lot of work to achieve FY consensus. Revenue growth was 13.7% YOY during H1 2015. Full year consensus implies H2 2015 revenue growth of 3.8% YOY. This is probably about right. However ...</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The group's EBITDA margin dropped to its lowest level in six years during H1 2015; to 5.6% from 11.8% in H1 2014. For DIA to meet consensus forecast of £18 million in EBITDA for FY 2015, then this suggests that the group's EBITDA margin needs to rise back to 14.6% during H2 2015; or nearly 3x the level achieved during the first half. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj31YbtsTW_8edoUXhcinPMDX6Ut6W5DPwKlPtQCyL2jjelrhmNGh_crkq9i1JybSwBSKUqI-iWZiRXpB4sosv0u11sAO2yYNlPAiH4EP7LLLXURLpbp1DJ6vPvizqGwAJ2vKwTg263tw8/s1600/DIA+rev+%2526+margin.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj31YbtsTW_8edoUXhcinPMDX6Ut6W5DPwKlPtQCyL2jjelrhmNGh_crkq9i1JybSwBSKUqI-iWZiRXpB4sosv0u11sAO2yYNlPAiH4EP7LLLXURLpbp1DJ6vPvizqGwAJ2vKwTg263tw8/s400/DIA+rev+%2526+margin.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight semi-annual revenue growth (%YOY) and EBITDA margin (%) <br />and implied H2 2015E revenue growth and EBITDA margin from consensus forecast<br /><i>Source: DIA interim and annual reports, Bloomberg consensus</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
In terms of FY 2015 consensus EPS projections, then these look even further stretched. DIA reported 5.4 pence per share of EPS during H1 2015. Full year 2015 consensus expects 23 pence per share. This implies over a threefold increase of first half EPS during the second half; or 17.6pps in H2 2015. Second half earnings have historically been weighted and stronger than first half, but even so, over the past six years they have averaged 1.5 x higher than first half EPS ... not 3.2 x. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
On the basis of DIA's second half earnings rising inline with the historical 1.5 x uplift over first half earnings, that would suggest H2 2015 EPS of 8.1pps, or 13.5pps for FY 2015.</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggdHAwezjsjbey-qFzz8aozhyoMNBWYU6CHogqyIXbcC62zGy7qQ5SZj1Ol-88FsgpgJsvzDx5DmCdiygngomsFyAemb745bsgXzqpulG2MsxkvhXqpJ9EXFhRKwq3bnpD32oV-LS1kzY/s1600/DIA+EPS.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggdHAwezjsjbey-qFzz8aozhyoMNBWYU6CHogqyIXbcC62zGy7qQ5SZj1Ol-88FsgpgJsvzDx5DmCdiygngomsFyAemb745bsgXzqpulG2MsxkvhXqpJ9EXFhRKwq3bnpD32oV-LS1kzY/s400/DIA+EPS.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight semi-annual EPS and implied H2 2015E EPS from consensus forecast <br />and H2 EPS as multiple of H1 EPS<br /><i>Source: DIA interim and annual reports, Bloomberg consensus</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
A 13.5pps FY 2015 EPS outturn, would imply the shares are trading on 38x earnings. I reckon 20x would be generous, which implies a share price closer to 270p/shr. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9OVR5PEVRYQORjP-3kadwC-f2pm1_uG4cyu9r1A4-QuaoauwRA3k_8sQG3ILNgYgNPWmYMjO2DsdzbnIw-XmH72yh_gAmTfaeww-dyCGPtX1kyKdgOHBoD7RUL4RQyf1u6KyhOaTZJ18/s1600/PER.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9OVR5PEVRYQORjP-3kadwC-f2pm1_uG4cyu9r1A4-QuaoauwRA3k_8sQG3ILNgYgNPWmYMjO2DsdzbnIw-XmH72yh_gAmTfaeww-dyCGPtX1kyKdgOHBoD7RUL4RQyf1u6KyhOaTZJ18/s400/PER.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight forward P/E and EV/EBITDA rating<br /><i>Source: Bloomberg consensus</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaKqvkC7vcjd8B4ZxqI1E7sBnoDZyXqzbh4WAupLOjSwmYXCq54Tau3foFCuH2FIBbCLuWv3ksaaNe1tKnVTfVMsyZBRTLAKktpq-IjRzWqzgTvw3cQETMHlnxMNCJTg7-MGr7zNSFBo8/s1600/Share+price.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaKqvkC7vcjd8B4ZxqI1E7sBnoDZyXqzbh4WAupLOjSwmYXCq54Tau3foFCuH2FIBbCLuWv3ksaaNe1tKnVTfVMsyZBRTLAKktpq-IjRzWqzgTvw3cQETMHlnxMNCJTg7-MGr7zNSFBo8/s400/Share+price.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dialight share price<br /><i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
I remain short. </div>
<div style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer: The information, discussions
or topics referred to on this blog should in no way be considered “advice” to
buy or sell anything. The information which may be referred to is freely
available in the public domain and where required the source of information is
referenced to for verification. While every effort has been made to ensure the
veracity of any information contained within this blog, the author accepts no
responsibility for the accuracy of any information contained within this blog or
for the sources of information which may be referred to. Readers are
responsible for their own actions and interpretation of the information
contained within this blog. </span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-3094535059040943132015-07-27T06:50:00.000-07:002015-07-27T06:50:37.497-07:00Globo (GBO) ... a few piccies redux<div style="text-align: right;">
Monday 27th July 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Back in October 2013, I <a href="http://www.lordshipstrading.blogspot.co.uk/2013/10/globo-gbo-few-piccies.html" target="_blank"><span style="color: cyan;">posted a few charts</span></a> on Globo (GBO, mkt cap £172m), the AIM listed software company currently seeking to raise c. $180 million by way of high yield debt. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Here they are updated. I am short GBO. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrVe9X6xd_XMfDVRNHG75Zbr9jUDGs55SAzVW8aVImRdujxpdcRDo5tZzSegYUcTdOvDJvBbaBANBl2d8exKm0U_loA402w_IDyTKHSJlQMWmW2vsfKM2rS17f16fJ7OlQjwuBljrsFp4/s1600/Net+proceeds.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrVe9X6xd_XMfDVRNHG75Zbr9jUDGs55SAzVW8aVImRdujxpdcRDo5tZzSegYUcTdOvDJvBbaBANBl2d8exKm0U_loA402w_IDyTKHSJlQMWmW2vsfKM2rS17f16fJ7OlQjwuBljrsFp4/s400/Net+proceeds.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
The above chart and immediately below chart highlights the group's net cash received by way of share and debt issuance during the period 2007-14. It does not include the further $180 million the group is currently seeking to raise by way of a high yield bond. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjay75rDzj1ke6TtfXEKMN1h_l4S4ZKcJrfYFlWv8iWlulYxmTUV59G7n5BIwLHXk1J5B6nJiK5muMbxN8-g2FrWO8m63jBaBJaGGV5pb-ALmEvtAqsrOqM9t2sWHFecn6NN727Ol4dLPM/s1600/Total+net+proceeds.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjay75rDzj1ke6TtfXEKMN1h_l4S4ZKcJrfYFlWv8iWlulYxmTUV59G7n5BIwLHXk1J5B6nJiK5muMbxN8-g2FrWO8m63jBaBJaGGV5pb-ALmEvtAqsrOqM9t2sWHFecn6NN727Ol4dLPM/s400/Total+net+proceeds.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_FykjzoOMiRR_tRJDFDGrMQnD1HuSBaQ7YTDuoiaoPBfAyTncZHxTDEJ9B8eb6PoW5SyrGDsVhgwGXzDE0kZEuanitJN-qCMcWMMlR3gn9wPNqH2zDuLSwvMPV2pth29FhSFKS2mJ4QU/s1600/Net+proceeds+and+operating+cash+flow.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_FykjzoOMiRR_tRJDFDGrMQnD1HuSBaQ7YTDuoiaoPBfAyTncZHxTDEJ9B8eb6PoW5SyrGDsVhgwGXzDE0kZEuanitJN-qCMcWMMlR3gn9wPNqH2zDuLSwvMPV2pth29FhSFKS2mJ4QU/s400/Net+proceeds+and+operating+cash+flow.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheZEvGMtge6DG3G8isRpRzf87yuvmmSDCmajRKmMSaoUYL5azYW_ShuWb6pT0TavPHwuNvpDBfAzFKCdcc2dJPEGX9YTrJgH0T2YwUobPJCmzdlXY1TiaYL474QAiS-3r424AXg0jOqwI/s1600/Total+net+proceeds+and+operating+cash+flow.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheZEvGMtge6DG3G8isRpRzf87yuvmmSDCmajRKmMSaoUYL5azYW_ShuWb6pT0TavPHwuNvpDBfAzFKCdcc2dJPEGX9YTrJgH0T2YwUobPJCmzdlXY1TiaYL474QAiS-3r424AXg0jOqwI/s400/Total+net+proceeds+and+operating+cash+flow.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglPhnWv5sjlKUeEankiTwrdF9Qy3NWvhS1MJ0TJyvrVmI2r3CWgaTiomEAlLUZKWLr9jgbIcPEgro0vO_CSf-fbuxPih1duyRVvcNwyku-A6ihtCFoHIbnZKiI-nlL9NOzcVn07JMOcuY/s1600/Free+cash+flow.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglPhnWv5sjlKUeEankiTwrdF9Qy3NWvhS1MJ0TJyvrVmI2r3CWgaTiomEAlLUZKWLr9jgbIcPEgro0vO_CSf-fbuxPih1duyRVvcNwyku-A6ihtCFoHIbnZKiI-nlL9NOzcVn07JMOcuY/s400/Free+cash+flow.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgobXnAgD4rkJ1-0pNPaD37bsSleBWO_WKemTumxjh1VOF_QCVl-xbhQ3z-kKEt7Vjs_X55UwR3jVHIRjqHHRruFN_Cs5lGPLn52C64s7IQp-0q5kLaRn7uxriZ69-yC72ntp63vXEbS60/s1600/Tax+reported+and+paid.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgobXnAgD4rkJ1-0pNPaD37bsSleBWO_WKemTumxjh1VOF_QCVl-xbhQ3z-kKEt7Vjs_X55UwR3jVHIRjqHHRruFN_Cs5lGPLn52C64s7IQp-0q5kLaRn7uxriZ69-yC72ntp63vXEbS60/s400/Tax+reported+and+paid.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdC2icdheEFZBN_I89AOpHQWhrCTMtks9QsrZI5OP3P3ypoGgEQrI8FXWgwbTWm6LUSj21YmY2u3TJubY04w35La9dQCOLPzIp37ZnYylXJRdwvbZ7lVhLoYGroaAyRrclbFTGIZhtvqA/s1600/Tax+and+outflow.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdC2icdheEFZBN_I89AOpHQWhrCTMtks9QsrZI5OP3P3ypoGgEQrI8FXWgwbTWm6LUSj21YmY2u3TJubY04w35La9dQCOLPzIp37ZnYylXJRdwvbZ7lVhLoYGroaAyRrclbFTGIZhtvqA/s400/Tax+and+outflow.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJn6zqT5hbw81ABo3RfgMfaxRrVtoUa3d2nVoeUrHMrx6EOIBBR6Fx6Md5AHwJNYWMwGsB4kyWPvJIQelBL1pq1RsZ3aR64_oZZwhDnMJECRo6v6FVNL7w_VBC8LRLj2txUzWpOwXreDo/s1600/Receivables.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJn6zqT5hbw81ABo3RfgMfaxRrVtoUa3d2nVoeUrHMrx6EOIBBR6Fx6Md5AHwJNYWMwGsB4kyWPvJIQelBL1pq1RsZ3aR64_oZZwhDnMJECRo6v6FVNL7w_VBC8LRLj2txUzWpOwXreDo/s400/Receivables.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2vsQV7wGOZ0C9KnnR8Td7yGw2DOgo0L-_1Tco9drmmghw3BvmsQUvxrXDOSGIHgI3evfTOxMNZ-pdmx_ElSxRqp5XrlEoM8rHvf6zBIxRZi18IqDgj3YVPYhFJgVslGP8f5dmPakkmPU/s1600/Receivables+and+GT.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2vsQV7wGOZ0C9KnnR8Td7yGw2DOgo0L-_1Tco9drmmghw3BvmsQUvxrXDOSGIHgI3evfTOxMNZ-pdmx_ElSxRqp5XrlEoM8rHvf6zBIxRZi18IqDgj3YVPYhFJgVslGP8f5dmPakkmPU/s400/Receivables+and+GT.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4YInNm4KME8Adanv5K3-Exi8bQyx0KQppguSnHSrW7v2jMKKcl9TXCP0Yl0vl1UQByJiQHYbC82Gj0jVs_QQNMDlxUkYmB68olp7qP3_BLzDEd67veCqlsfrU_RcIzzlFoOeyFYqzTSE/s1600/Payables.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4YInNm4KME8Adanv5K3-Exi8bQyx0KQppguSnHSrW7v2jMKKcl9TXCP0Yl0vl1UQByJiQHYbC82Gj0jVs_QQNMDlxUkYmB68olp7qP3_BLzDEd67veCqlsfrU_RcIzzlFoOeyFYqzTSE/s400/Payables.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo annual reports</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
<h2>
<span style="color: red;">Bonus charts</span></h2>
</div>
<div style="text-align: justify;">
And here are the bonus charts on Globo Technologies ...<br />
<br />
As a reminder, in December 2012, GBO sold 51% of its subsidiary, Globo Technologies (GT), to a company called, Zipersi Consulting, owned by GT’s management team. GT was sold for €11.2 million, although the sale was principally financed by the vendor, Globo, with deferred consideration due. <br />
<br />
One may well ask why GBO elected to sell 51% of its stake in GT? If the business was bad, then why not sell all of it? If it was a good business, then why sell it at all, or even as much as 51%? Especially on preferential financing terms to the management team buyers? </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Nonetheless since December 2012 ...<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2NjXpZu-kfuwbI763T7g2NoU_y2yGxZOFC1fSgCCsSK5I8FhutJVsAui7vviBQkHRFChRC6itZyKMwPguriBm2fuSrbSvk4Bu5eb7xzw_VtWphRkXCju8veJ1qoh_Z42fl7v9UyEaFtQ/s1600/GT+receivables.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="241" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2NjXpZu-kfuwbI763T7g2NoU_y2yGxZOFC1fSgCCsSK5I8FhutJVsAui7vviBQkHRFChRC6itZyKMwPguriBm2fuSrbSvk4Bu5eb7xzw_VtWphRkXCju8veJ1qoh_Z42fl7v9UyEaFtQ/s400/GT+receivables.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo Technologies annual reports</i></td></tr>
</tbody></table>
GT's 2014 trade receivables and revenue recognised under IAS 11 is now equivalent to 109% of revenue. This is up from 64% in 2012.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiW5qIwkBw5hb61VuCPWGXwUT5NDjum0Ts471VwjEvNELh3FeYNrhssXABJuMqmrBOIJi2JxCIrAB7mNsd8BdwSqv9KAjiyT-ntDKDuZ77ZVklzN3cmjwjFQOe6N_Y7JjnSYVlLNPClgMI/s1600/GT+net+debt.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="241" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiW5qIwkBw5hb61VuCPWGXwUT5NDjum0Ts471VwjEvNELh3FeYNrhssXABJuMqmrBOIJi2JxCIrAB7mNsd8BdwSqv9KAjiyT-ntDKDuZ77ZVklzN3cmjwjFQOe6N_Y7JjnSYVlLNPClgMI/s400/GT+net+debt.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><i>Source: Globo Technologies annual reports</i></td></tr>
</tbody></table>
Meanwhile, GT's net debt has ballooned from €0.780 million in 2012, to €20.036 million in 2014. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
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Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-86560281847680113932015-07-23T08:27:00.000-07:002015-07-23T08:27:34.030-07:00Rocket Internet (RKET GY) ... The Imitation Game part III<div style="text-align: right;">
Thursday 23rd July 2015</div>
<div>
<br /></div>
<div style="text-align: justify;">
Some of the text in Rocket Internet's prospectus is pretty amusing. It sounds impressive but when one dwells on it for longer than a second, one appreciates its absurdity. </div>
<div style="text-align: justify;">
<br />
<h2>
<span style="color: red;">Dafiti</span></h2>
</div>
<div style="text-align: justify;">
Take for example the background information Rocket provides in its prospectus on Dafiti, the online clothing, shoe and accessory retailer in Brazil, Argentina, Chile, Colombia and Mexico: </div>
<div>
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv0SXTOtnUCCEN1wox5v85AnlYiHAmPfinCk-RpIj3IotRhp0xXqbmAK-Y4cj-4zjQQebXRR1LLlkY_AodnKGuBWDSYx3lLystTRNaPElmcLrUvrEldHYs5FTaxmaPoHJ9kWGwY08YVUk/s1600/Awareness.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="198" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhv0SXTOtnUCCEN1wox5v85AnlYiHAmPfinCk-RpIj3IotRhp0xXqbmAK-Y4cj-4zjQQebXRR1LLlkY_AodnKGuBWDSYx3lLystTRNaPElmcLrUvrEldHYs5FTaxmaPoHJ9kWGwY08YVUk/s400/Awareness.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dafiti brand recognition in Brazil<br />
<i>Source: Rocket Internet prospectus</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
As highlighted above, according to Rocket, by March 2014 the Dafiti brand was recognized by almost 90% of the Brazilian population. That's not bad going considering the brand was launched three years earlier in 2011 and probably puts it up there with Coca-Cola for brand awareness. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Of course according to the World Bank, 24% of the Brazilian population is 14 or under, while a further 7% is over the age of 64. So 90% brand recognition for an online clothing and shoe retailer amongst the entire Brazilian population (under 14's and over 65's included) within 3 years is a sterling effort. </div>
<div style="text-align: justify;">
<br />
<h2>
<span style="color: red;">Lamoda</span> </h2>
</div>
<div style="text-align: justify;">
Another example is, Lamoda, Rocket's online clothing, shoe and accessory retailer, this time focused on Russia, Kazakhstan and the Ukraine. Lamoda has also has gained impressive and rapid brand recognition: </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhS5j9LiKrZ9YeyxTOb2dgdapDl-ZOiu_1qhYGJXBtaW3i_JTRwxiCJdI6NDp5vjncD-HoR7ZuhSJ4Pu5W9-3mSMstDiZj0-Bmo_3pWnhRW0kppctBT_2V8D5Pd3RFWk0juQar5UmRZ1WY/s1600/Lamoda+awareness.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="168" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhS5j9LiKrZ9YeyxTOb2dgdapDl-ZOiu_1qhYGJXBtaW3i_JTRwxiCJdI6NDp5vjncD-HoR7ZuhSJ4Pu5W9-3mSMstDiZj0-Bmo_3pWnhRW0kppctBT_2V8D5Pd3RFWk0juQar5UmRZ1WY/s400/Lamoda+awareness.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Lamoda brand recognition in Russia<br />
<i>Source: Rocket Internet prospectus</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
As highlighted above, according to Rocket, by March 2014 the Lamoda brand was among the most recognized fashion retail brands in the CIS, with an impressive 84% of the Russian population recognizing its brand. Lamoda was launched in 2011.<br />
<br />
<h2>
<span style="color: red;">Jabong</span></h2>
A further example is Jabong, another online fashion company, operating in India:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBuudI7XKoQhxpTlQetusXbEkonTZ10gTruhq-kOZebGnfGuDGEd4rSJzJek0oXvBi9xs47GPviYBlwn6O0E2vYKaSKXsAr4vLs4ZRiqtS1oZsBsy8LYDYtXo4x9_Solgw-lRowEFuUZQ/s1600/Jabong+market+size.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBuudI7XKoQhxpTlQetusXbEkonTZ10gTruhq-kOZebGnfGuDGEd4rSJzJek0oXvBi9xs47GPviYBlwn6O0E2vYKaSKXsAr4vLs4ZRiqtS1oZsBsy8LYDYtXo4x9_Solgw-lRowEFuUZQ/s400/Jabong+market+size.jpg" width="391" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Jabong's market opportunity<br />
<i>Source: Rocket Internet prospectus</i></td></tr>
</tbody></table>
In its prospectus, Rocket indicates that the Indian fashion retail market <i>" ... is expected to amount to US$55 million in 2014."</i> This looks to be an innocent typo and more likely supposed to say US$55 billion instead. Especially as Rocket continues to suggest that it will grow <i>"... to US$88 billion by 2018."</i> This is a minor typo. What appears somewhat less straightforward is the commentary regarding internet penetration of India's fashion market.<br />
<br />
Rocket indicates that <i>"the online fashion penetration rate in India is expected to be a relatively low level of 0.8% of the overall fashion retail market compared to 11.3% in the United States in 2014."</i> If that is the case, then on the basis of the overall fashion retail market amounting to some US$ 55 billion, that would suggest that the online fashion market was worth c. US$ 440 million in 2014. As Rocket highlights further up, Jabong reported <i>"... INR 4,385.7 million in net revenues in fiscal 2013." </i>This is c. $US 76 million at an average 58 USDINR exchange rate during 2013, which suggests that from a relatively quick start of a matter of a few years, Jabong had captured 17% of the online fashion retail market in India.<br />
<br />
In its 2014 annual report, Rocket goes on to revise Jabong's 2013 revenue to INR 3,443 million or c. $US 59 million. But Jabong's 2014 revenue was reported to have risen to INR 8,114 million or c. $US 133 million at an average 61 USDINR exchange rate in 2014. On Rocket's information provided that would suggest that within a matter of a few years, Jabong had captured over 30% of India's online fashion market by 2014. Remarkable. </div>
<div style="text-align: justify;">
<br />
<h2>
<span style="color: red;">Namshi</span></h2>
Rocket's online fashion offering to the Middle East, Namshi, has seemingly topped India's Jabong for market share gain. </div>
<div style="text-align: justify;">
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDzhVhl6M3JgkRc48zqkltk5qIrgcQzGSknbYjn3JWwhqKjr2fpQ_Kxmcl9MZHsaDvFBuLAoYFEA_gHgycdetXUJC0oeU5yUJX9B4JbfjJxeFEaFVIsrhZQjCW6nZ_5SA3G3Ga94L_bHA/s1600/Namshi+market+share.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDzhVhl6M3JgkRc48zqkltk5qIrgcQzGSknbYjn3JWwhqKjr2fpQ_Kxmcl9MZHsaDvFBuLAoYFEA_gHgycdetXUJC0oeU5yUJX9B4JbfjJxeFEaFVIsrhZQjCW6nZ_5SA3G3Ga94L_bHA/s400/Namshi+market+share.jpg" width="317" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Namshi's market opportunity<br />
<i>Source: Rocket Internet prospectus</i></td></tr>
</tbody></table>
On Rocket's market information provided above of a $US 30 billion total fashion retail market but 0.4% online penetration by 2014, the online fashion market was worth $US 120 million in 2014. Hence with Rocket reporting net revenue of AED 53 million in 2013, rising to AED 168 million in 2014 or c. US$ 15 million and US$ 46 million respectively, this would imply 38% market share by 2014. Another remarkable result in a matter of two years since inception. <br />
<br />
------------------------------------------------------------------------------------------------</div>
<div style="text-align: justify;">
<br />
In many cases the numbers provided are also as amusing.<br />
<h2>
<span style="color: red;">Dafiti again ...</span></h2>
The table below is from Rocket's prospectus, highlighting Dafiti's key performance indicators, among which, unique visitors to Dafiti's site is included:<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVWcvxUcDwo1Fsx_9kP6AHW74UZYskN9kO2CK8QN9J5cCJbxZf4O4A3w4ctaB3IqqJwi_tsF73uY94s0s-6l87XNNk5hZ7dfaVp4l6DzQgdx6dWl1GXzdJ0lT-MYYEoMv5E63bLRoJ15Q/s1600/Dafiti+unique+visitors.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="201" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVWcvxUcDwo1Fsx_9kP6AHW74UZYskN9kO2CK8QN9J5cCJbxZf4O4A3w4ctaB3IqqJwi_tsF73uY94s0s-6l87XNNk5hZ7dfaVp4l6DzQgdx6dWl1GXzdJ0lT-MYYEoMv5E63bLRoJ15Q/s400/Dafiti+unique+visitors.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Dafiti's key performance indicators<br />
<i>Source: Rocket Internet prospectus</i></td></tr>
</tbody></table>
Rocket indicates that the Dafiti website received 208 million unique visitors in 2013, which was up from 167 million unique visitors in 2012. That's a lot of visits for a website that didn't exist a few years prior. In fact ...<br />
<br />
Dafiti is targeted at Brazil, Argentina, Chile, Colombia and Mexico. According to the IMF, in 2013 these countries populations were:<br />
<br />
Brazil ................. c. 201 million<br />
Argentina ........... c. 42 million<br />
Chile .................. c. 47 million<br />
Colombia ........... c. 18 million<br />
Mexico ............... c. 118 million<br />
<br />
A combined population of c. 426 million.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiw2gQpfk1lR_FDO_55urzN4WNQBxOTU4z3FExhDgqPW9y80UWWN2oIgoC29Yu2FqyJ1RE8aCpn22NW3FJf78KSNfU7EbrvtQokG2_9GfWkH9GOr7UE0EgAMCMkQm_ghgOXQYVbO7LdjDU/s1600/IMF+population.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="301" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiw2gQpfk1lR_FDO_55urzN4WNQBxOTU4z3FExhDgqPW9y80UWWN2oIgoC29Yu2FqyJ1RE8aCpn22NW3FJf78KSNfU7EbrvtQokG2_9GfWkH9GOr7UE0EgAMCMkQm_ghgOXQYVbO7LdjDU/s400/IMF+population.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Populations of Dafiti's markets in 2013 (million)<br />
<i>Source: Rocket Internet, IMF for population data</i></td></tr>
</tbody></table>
According to the World Bank, in 2013 the number of persons per 100 with access to the internet in each of these countries were:<br />
<br />
Brazil ................. 51.6 (per 100)<br />
Argentina ........... 59.6 (per 100)<br />
Chile .................. 66.5 (per 100)<br />
Colombia ........... 51.7 (per 100)<br />
Mexico ............... 43.5 (per 100)<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhc05WUey9SVxMaHuIiQOAEXItWeSHkBQeLQGZa-Z6Nj_Ldv0D5sD145BVftp602Bx1O0zC0xM63uRjDkDcce2X5DU6XDw9dgPTKuSd1vBADO8MChN6XKn4gQ0iCDDTxUTzhfFv0pFzucc/s1600/World+Bank+internet+users.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="205" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhc05WUey9SVxMaHuIiQOAEXItWeSHkBQeLQGZa-Z6Nj_Ldv0D5sD145BVftp602Bx1O0zC0xM63uRjDkDcce2X5DU6XDw9dgPTKuSd1vBADO8MChN6XKn4gQ0iCDDTxUTzhfFv0pFzucc/s400/World+Bank+internet+users.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Internet users per 100 in Dafiti's markets in 2013<br /><i>Source: Rocket Internet, World Bank for internet users</i></td></tr>
</tbody></table>
Hence, if Brazil's population in 2013 was c. 201 million and 51.6% of the population had access to the internet then that would suggest c. 104 million Brazilians had access to the internet in 2013.<br />
<br />
On a similar basis the others work out as follows:<br />
<br />
Brazil ................. c. 104 million<br />
Argentina ........... c. 25 million<br />
Chile .................. c. 31 million<br />
Colombia ........... c. 9 million<br />
Mexico ............... c. 52 million<br />
<br />
A combined population of c. 220 million with access to the internet in Dafiti's markets.<br />
<br />
Now Rocket reckons Dafiti had 208 million unique visitors to its website in 2013. Which is commonly understood to mean, the number of distinct individuals requesting pages from the website during 2013, regardless of how often they visit. I.e. 208 million individual sets of eye balls looked at Dafiti's website in 2013. So if Dafiti's markets have c. 220 million individuals with access to the internet, then practically 95% of them went onto Dafiti's website at some point during 2013? Of course some eyeballs may have inadvertently oggled the website from other countries but even so, most of the traffic must surely come from Brazil, Argentina, Chile, Colombia and Mexico. <br />
<br />
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com2tag:blogger.com,1999:blog-9008707982090470413.post-49400564447244809352015-07-07T05:48:00.001-07:002015-07-07T05:57:29.911-07:00Rocket Internet (RKET GY) ... The Imitation Game part II<div style="text-align: right;">
Tuesday 7th July 2015</div>
<br />
<div style="text-align: justify;">
Below is a copy of a presentation that the German business publication, <a href="http://www.manager-magazin.de/" style="color: cyan;" target="_blank">Manager Magazin</a>, posted in April 2013. The presentation itself is in English but I've used Google's translate function to translate Manager Magazin's accompanying text into English. The original German version may be found via the link above. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilojGqpe9PZZAejZzMM5LQqd0sp6QerfC4NsI6HFp0aI1TdYLMCnQ_CgAtKyV1EnB-iCOnIlW9IizQqb6hnr61hMFf9NrxjmDhm1Qefp62Cg4s_0Nnxss_9h4Cq6zGRD2Z8Ux2Y6TrTp8/s1600/Manager+magazin+front.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilojGqpe9PZZAejZzMM5LQqd0sp6QerfC4NsI6HFp0aI1TdYLMCnQ_CgAtKyV1EnB-iCOnIlW9IizQqb6hnr61hMFf9NrxjmDhm1Qefp62Cg4s_0Nnxss_9h4Cq6zGRD2Z8Ux2Y6TrTp8/s400/Manager+magazin+front.jpg" width="277" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Manager Magazin - on Rocket Internet presentation to investors<br />
<i>Source: http://www.manager-magazin.de/</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
It's reportedly a presentation used by Rocket Internet in marketing itself to potential investors in January 2013. I assume this presentation is not some sort of spoof and that it is the actual material used by Rocket Internet, which at the time would have been a private concern. If it is a spoof, then I'd be surprised - as Germans aren't renowned for pulling legs - but if it is then you may as well disregard the rest of this post. </div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh01Sl3ArJQS83f19qM2ZPYF15x6doZHrSOu_9ake9_QXfsvczMEqjpXfgUGt1ypDFfeU2XWgFDrkw1X7otak1RYWGHWxKvcQy6gjxogpoR5VSSrDXIr5BybNhm-522a9UX6bKmfzUcCZM/s1600/Manager+magazin+date.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh01Sl3ArJQS83f19qM2ZPYF15x6doZHrSOu_9ake9_QXfsvczMEqjpXfgUGt1ypDFfeU2XWgFDrkw1X7otak1RYWGHWxKvcQy6gjxogpoR5VSSrDXIr5BybNhm-522a9UX6bKmfzUcCZM/s400/Manager+magazin+date.jpg" width="343" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Manager Magazin - on Rocket Internet presentation to investors - January 2013<br /><i>Source: http://www.manager-magazin.de/</i></span></td></tr>
</tbody></table>
<div style="text-align: justify;">
Clearly, January 2013 is some time ago. However, if I'd been on the receiving end of this pitch, then in hindsight I'd be a touch disgruntled and left with a feeling I'd been somewhat misled. And here's why ... </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
On the final page of the presentation, it highlights the revenue run rates for the major companies in Rocket's portfolio, based on November 2012 trading. Given that most of these companies had been established in less than 24 months prior, this is a great way to leave would be investors positively purring at the prospect of a bite at - not one - but eight incredibly rapidly growing online businesses.</div>
<div style="text-align: justify;">
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghIugIgIv1X-0eULxvpOzrI4CmoWsPQWEqk9ZuyOobxY7IqRgOAtiBEPCOgWZrY9wFH9fM_3pZRXsjXmP3JKHp27boCqeJI9l1kA0oA9Yhu4BXE54lFcC06QsbB85Cv7NCr7dzzrn39Gk/s1600/Manager+magazin+run+rates.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEghIugIgIv1X-0eULxvpOzrI4CmoWsPQWEqk9ZuyOobxY7IqRgOAtiBEPCOgWZrY9wFH9fM_3pZRXsjXmP3JKHp27boCqeJI9l1kA0oA9Yhu4BXE54lFcC06QsbB85Cv7NCr7dzzrn39Gk/s400/Manager+magazin+run+rates.jpg" width="336" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Manager Magazin - on Rocket Internet presentation to investors - <br />revenue run rates of leading portfolio companies<br /><i>Source: http://www.manager-magazin.de/</i></span></td></tr>
</tbody></table>
<h2 style="text-align: justify;">
<span style="color: red;">The big five: Lamoda, Dafiti, Home 24, Zalora and Lazada</span></h2>
<div style="text-align: justify;">
As of January 2013, it would appear that Rocket presented its top five revenue generating businesses to investors as achieving run rate revenue based on November 2012 annualized run rates as follows:</div>
<div style="text-align: justify;">
<ul>
<li>Lamoda, founded two years prior in 2010, was achieving €233 million in run rate revenue.</li>
<li>Dafiti, also founded in 2010, was achieving €225 million in run rate revenue.</li>
<li>Home 24, founded in 2009, was achieving €151 million in run rate revenue.</li>
<li>Zalora, founded one year prior in 2011, was achieving €97 million in run rate revenue.</li>
<li>Lazada, founded two years prior in 2010, was achieving €42 million in run rate revenue. </li>
</ul>
</div>
<div style="text-align: justify;">
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9g4xGNpl-jd4_Bwwo5xOIZZ019e5RfSlj8jpqEz42oc9yRlAyQ7Nsv0I_F5TUMN8r-stomzPg76M-z38Ii4YfwWtF5_dO1eajTPQsmjVACK6X3oQexnt3yImRzh9PgThQyqBxJr-m88M/s1600/RKET+run+rate.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9g4xGNpl-jd4_Bwwo5xOIZZ019e5RfSlj8jpqEz42oc9yRlAyQ7Nsv0I_F5TUMN8r-stomzPg76M-z38Ii4YfwWtF5_dO1eajTPQsmjVACK6X3oQexnt3yImRzh9PgThQyqBxJr-m88M/s400/RKET+run+rate.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Rocket Internet annualised run rate revenue based on November 2012 trading<br />
<i>Source: Manager Magazin, 19 April 2013</i></td></tr>
</tbody></table>
These are truly remarkable revenue run rates for businesses which had only been in operation for between one to two years. In my prior post I highlighted how much longer it had taken ASOS to grow its revenue base (as compared to Zalora) whereby ASOS was targeting richer nations with significantly higher internet penetration rates: <a href="http://www.lordshipstrading.blogspot.co.uk/2015/06/rocket-internet-rket-gy-imitation-game.html" target="_blank"><span style="color: cyan;">The Imitation Game</span></a><br />
<br />
Skipping forward to Rocket's IPO documentation from September 2014, and there are some sizeable differences between the suggested revenue run rates that were marketed to potential investors in January 2013 and the actual revenue out-turns for 2013. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
For example: </div>
<div style="text-align: justify;">
<ul>
<li>Lamoda's revenue was reported to be RUB 5,150 million for 2013, or c. €122 million at annual average EURRUB rates for 2013. This is 48% below the run rate indicated to potential investors in January 2013. </li>
<li>Dafiti's revenue was reported to be BRL 419 million for 2013, or c. €146 million at annual average EURBRL rates for 2013. This is 35% below the run rate indicated to potential investors in January 2013.</li>
<li>Home 24's revenue was reported to be €93 million for 2013. This is 38% below the run rate indicated to potential investors in January 2013.</li>
<li>Zalora's revenue was reported to be €69 million for 2013. This is 29% below the run rate indicated to potential investors in January 2013. </li>
<li>Lazada's revenue was reported to be €57 million for 2013. This is 15% below the run rate indicated to potential investors in January 2013. </li>
</ul>
<div>
In fact only the smaller revenue generating companies from the presentation: Jabong and Linio achieved 2013 revenue that was actually in line with that of the run rate presented to potential investors in January 2013.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxlONAp47QJWlFHLjU0hgLlYJSyohzuUdcqJAND0LrjgtcgUcvvKHWrl5kg7kg726sKzoZE22UqDBh0iMRCJMLqNGQuJZ550BSJ4MPmvdV86ksWLOEF1EPrIlf8DtKnVCcOM3NKo3ZXzA/s1600/RKET+run+rate+vs+actual.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxlONAp47QJWlFHLjU0hgLlYJSyohzuUdcqJAND0LrjgtcgUcvvKHWrl5kg7kg726sKzoZE22UqDBh0iMRCJMLqNGQuJZ550BSJ4MPmvdV86ksWLOEF1EPrIlf8DtKnVCcOM3NKo3ZXzA/s400/RKET+run+rate+vs+actual.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Rocket Internet annualised run rate revenue <br />based on November 2012 trading as compared to 2013 full year revenue<br /><i>Source: Manager Magazin, 19 April 2013, and Rocket Internet IPO Prospectus</i></span></td></tr>
</tbody></table>
On a cumulative basis, while as at January 2013 Rocket's management were implying total run rate revenue for the combined businesses of €855 million, in the event the out-turn for full year 2013 was 32% less, at €579 million.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIyI6eunD-aP-2E7lM1xvUteRuaPitk3OzrB8UXUKFQM_UexYfHgjKcLlYY3CvuDxx4BGgEjVwb8CVggpF2pw038uw0AaxH2p8WEs6ymF2YP2R35OlIyfmCbxPUE2vlDJrq6AjafFlIz4/s1600/RKET+combined+run+rate.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="232" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIyI6eunD-aP-2E7lM1xvUteRuaPitk3OzrB8UXUKFQM_UexYfHgjKcLlYY3CvuDxx4BGgEjVwb8CVggpF2pw038uw0AaxH2p8WEs6ymF2YP2R35OlIyfmCbxPUE2vlDJrq6AjafFlIz4/s400/RKET+combined+run+rate.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Rocket Internet annualised run rate revenue based <br />on November 2012 trading as compared to 2013 full year revenue</span><br />
<i><span style="font-size: x-small;">Source: Manager Magazin, 19 April 2013, and Rocket Internet IPO Prospectus</span></i></td></tr>
</tbody></table>
As I mentioned prior, had I invested at a private investing round in January 2013 on the back of that presentation, I might feel a bit miffed. As there are sizable losses and an accompanying large cash burn pretty much across all of Rocket's portfolio, which have only continued to increase since, Rocket must be valued on some sort of revenue multiple. And yet the revenues fell short of what may have been expected from the run rates indicated from November 2012.<br />
<br />
Maybe Rocket's big five just had a blitzing November 2012 in the run up to that marketing round in January 2013?<br />
<br />
Of course the silver lining for any 2013 investor is that Rocket's valuation has rocketed higher since then, while revenues have also risen dramatically into 2014. More on each later ... </div>
</div>
<div style="text-align: justify;">
<br />
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-80158791783688121832015-06-16T06:20:00.000-07:002015-07-07T05:51:06.960-07:00Rocket Internet (RKET GY) ... The Imitation Game<div style="text-align: justify;">
<div style="text-align: right;">
Tuesday 16th June 2015</div>
</div>
<div style="text-align: justify;">
<br />
This is the first in what will likely be a series of posts looking at Rocket Internet (RKET GY). It is too big to tackle in just the one.<br />
<br /></div>
<div style="text-align: justify;">
Rocket Internet is an internet incubator. What Rocket broadly does is to imitate online business models in the United States or major European countries and attempt to roll out the concept, usually in South Asia, Eastern Europe or Latin America.<br />
<br />
Capitalised at c. €6.3 billion, it is the major shareholder in a portfolio of companies which racked up combined losses of c. €586 million* in 2014.<br />
<span style="font-size: x-small;">*my estimates on an annual average respective euro rate basis to each winner.</span><br />
<br />
So while the company plays the Imitation Game, I reckon there's another game also being played by its investors. A game of greater fools ...<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_7K_cE_4_-BjHm0qlRT4KXVvH_-m0Lt4UZzBkO_1_DIx6Hu2XfBRNld7yx9xI0ATHGnUm2LkaazEKFdYg0vZh3jmoBrRUmwo2hlqFEnVPf48gYnwqSaTNcGTBEhuzvqn4fAZl8-ioKbU/s1600/RKET+Share+price+16+June+2015.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_7K_cE_4_-BjHm0qlRT4KXVvH_-m0Lt4UZzBkO_1_DIx6Hu2XfBRNld7yx9xI0ATHGnUm2LkaazEKFdYg0vZh3jmoBrRUmwo2hlqFEnVPf48gYnwqSaTNcGTBEhuzvqn4fAZl8-ioKbU/s400/RKET+Share+price+16+June+2015.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div>
<span style="font-size: x-small;">Rocket Internet share price</span></div>
<div>
<i><span style="font-size: x-small;">Source: Bloomberg</span></i></div>
</td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
<h2>
<span style="color: red;">The raise</span></h2>
Rocket Internet AG ("Rocket") arrived on the Frankfurt Stock Exchange in early October 2014, raising c. €1.4 billion through equity at €42.50/shr. It was reportedly Germany's biggest IPO since 2007<span style="font-family: inherit;">. </span><br />
<br />
The capital raised at IPO, came shortly after it had raised €333 million from the Philippine Long Distance Telephone Company in August 2014, and €435 million from United Internet (€333 million of which was in cash).<br />
<br />
In total, the group appears to have raised c. €2.1 billion during H2 2014.<br />
<br />
Rocket is an internet incubator. What this means is described by Rocket more fully below in a segment from its prospectus:</div>
<blockquote class="tr_bq" style="text-align: justify;">
<span style="color: #cccccc; font-family: inherit;">We identify and build proven Internet business models and transfer them to new, </span><span style="color: #cccccc; font-family: inherit;">underserved or untapped markets, mainly outside the United States and China, where </span><span style="color: #cccccc; font-family: inherit;">we seek to scale them into market leading online companies. We started in 2007 with </span><span style="color: #cccccc; font-family: inherit;">4 employees and 2 consumer brands, based on an initial investment of €0.5 million </span><span style="color: #cccccc; font-family: inherit;">from European Founders Fund GmbH & Co. Beteiligungs KG Nr. 1 (later renamed </span><span style="color: #cccccc; font-family: inherit;">Global Founders Capital GmbH & Co. Beteiligungs KG Nr. 1 (“Global Founders </span><span style="color: #cccccc; font-family: inherit;">Capital Fund”)). As of the date of this prospectus, on an aggregate basis, more than </span><span style="color: #cccccc; font-family: inherit;">20,000 employees work across our network of companies, which conducts business </span><span style="font-family: inherit;"><span style="color: #cccccc;">in 116 countries on 5 continents. </span><span style="background-color: #fff2cc; color: #444444;">Our most mature companies, which we refer to as </span></span><span style="font-family: inherit;"><span style="background-color: #fff2cc; color: #444444;">proven winners, generated aggregate net revenues of €757 million</span><span style="color: #cccccc;"> (unaudited sum </span></span><span style="color: #cccccc; font-family: inherit;">total of their net revenues based on the generally accepted accounting principles </span><span style="color: #cccccc; font-family: inherit;">applicable for the relevant company, in each case taking the last fiscal year for which </span><span style="color: #cccccc; font-family: inherit;">data was available) </span><span style="background-color: #fff2cc; color: #444444; font-family: inherit;">and aggregated net losses of €442 million</span><span style="color: #cccccc; font-family: inherit;"> (unaudited sum total of </span><span style="color: #cccccc; font-family: inherit;">their net losses based on generally accepted accounting principles applicable for the </span><span style="color: #cccccc; font-family: inherit;">relevant company, in each case taking the last fiscal year for which data was </span><span style="color: #cccccc; font-family: inherit;">available and excluding extraordinary gains of Dafiti resulting from the measurement </span><span style="color: #cccccc; font-family: inherit;">of limited partnership interests). The Issuer’s aggregate direct and indirect stakes in </span><span style="color: #cccccc; font-family: inherit;">all of our companies, including proven winners, our growing companies that have </span><span style="color: #cccccc; font-family: inherit;">already achieved a significant size, which we refer to as emerging stars, our regional </span><span style="color: #cccccc; font-family: inherit;">Internet groups and our strategic participations and other investments, have a </span><span style="color: #cccccc; font-family: inherit;">combined value of €2.6 billion(1) based on the respective latest third party financing </span><span style="color: #cccccc; font-family: inherit;">rounds (as described in more detail below in this element B.3).</span></blockquote>
<div style="text-align: justify;">
Germans aren't renowned for their sense of humour. And so it can only be concluded that Rocket's promoters are deadly serious about this operation. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Before proceeding much further, a few items to note ...</div>
<div style="text-align: justify;">
</div>
<ul>
<li>Rocket has been rocking along since 2007, when it started with €500,000 and a few employees.</li>
<li>At its current €37.5/shr, Rocket is capitalised at €6.3 billion. </li>
<li>As at 31 December 2014, Rocket's net asset value seemingly totaled c. €2.6 billion. However, ex-cash this was just c. €585 million. </li>
<li>Rocket's NAV is therefore c. 41% of its market capitalisation, while its ex cash NAV is c. 14% of its ex-cash market valuation. </li>
<li>The bulk of Rocket's €585 million ex-cash NAV is comprised of €554 million in "equity investments in associates". </li>
<li>A further €20 million and €3 million of its asset base is attributable to "receivables from subsidiaries" and "receivables from associates" respectively.</li>
<li>At the time of IPO in October last, Rocket's portfolio of companies included: </li>
<ul>
<li>11 proven winners</li>
<li>9 emerging stars</li>
<li>5 concepts</li>
<li>4 regional Internet groups</li>
<li>8 companies in strategic participations</li>
<li>9 companies in other investments</li>
<li>and of course various other bits and bobs</li>
</ul>
</ul>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhg3UkfNh_ISZ61cGuYbbuCGkSPoK8q4T13ea3DlRupR2GumFOtCP7ceXiyzhOD9b4FS3G66MBiPzGdXS-obA-MjdBaeyYVZiA3Wa_N4mm9CzUBc0f42uNQB3upbfnmht359szaxDj-jnk/s1600/RKET+Holdings.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhg3UkfNh_ISZ61cGuYbbuCGkSPoK8q4T13ea3DlRupR2GumFOtCP7ceXiyzhOD9b4FS3G66MBiPzGdXS-obA-MjdBaeyYVZiA3Wa_N4mm9CzUBc0f42uNQB3upbfnmht359szaxDj-jnk/s1600/RKET+Holdings.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Rocket's significant holdings as at time of IPO<br />
<i>Source: Rocket Internet Prospectus</i></td></tr>
</tbody></table>
<h2 style="text-align: justify;">
<span style="color: red;">
11 proven winners</span></h2>
<div style="text-align: justify;">
At the time of Rocket's IPO, its 11 proven winners (detailed below) reportedly generated aggregate net revenues of €757 million (unaudited sum total) in the most recent fiscal year leading up to the IPO. They also generated aggregate net losses of €442 million. You may well ask, with "winners" like those, who needs losers? <br />
<br />
Below is the 2012 to 2013 headline revenue and EBITDA performance of Rocket's 11 proven winners as provided in its prospectus.<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLnFoR7L3gfo073Ltf6PJtgl3TdX8t1bGu7MlZrt5Fgxf6tjQwrK9JUfxjF7tDj6CphWXJM-4mVjT3oSTuZ9_uWkFiiVTau0ZDKxXh7IhS0JIX7hG7-fLvwVHvifylRTRqZ6w7Rv3Rt7M/s1600/11+proven+winners+A.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="345" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLnFoR7L3gfo073Ltf6PJtgl3TdX8t1bGu7MlZrt5Fgxf6tjQwrK9JUfxjF7tDj6CphWXJM-4mVjT3oSTuZ9_uWkFiiVTau0ZDKxXh7IhS0JIX7hG7-fLvwVHvifylRTRqZ6w7Rv3Rt7M/s1600/11+proven+winners+A.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">2012 and 2013 revenue and EBITDA of Rocket's 11 proven winners<br />
<i>Source: Rocket Internet Prospectus</i></td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihA0Slsny6xX2XXT09nW6yZ8_Rs-Qatuhpbdw2tVMADbROvOnQpSszYsoSq0J30bqvuqrEjPKYJvYb-cejL_GlGmpd3gPWfgr3uq9Qpm91wGsUgaNOd5CV-KUr6DODqyP57G5z4t8xQ0Y/s1600/11+proven+winners+B.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="305" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihA0Slsny6xX2XXT09nW6yZ8_Rs-Qatuhpbdw2tVMADbROvOnQpSszYsoSq0J30bqvuqrEjPKYJvYb-cejL_GlGmpd3gPWfgr3uq9Qpm91wGsUgaNOd5CV-KUr6DODqyP57G5z4t8xQ0Y/s1600/11+proven+winners+B.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: 12.8000001907349px;">2012 and 2013 revenue and EBITDA of Rocket's 11 proven winners</span><br />
<i style="font-size: 12.8000001907349px;">Source: Rocket Internet Prospectus</i></td></tr>
</tbody></table>
</div>
<div style="text-align: justify;">
Two things are immediately apparent.<br />
<ul>
<li>Although these 11 proven winners racked up aggregate losses of €442 million in each respective fiscal year leading up to 2013, it's not even as if there were any <strike>winners</strike> profitable businesses among the 11. Indeed, each and every one was loss making. </li>
<li>Zalora, Lazada, and Jumia each had de minimis revenue during 2012, and yet went from this to €68.9 million, €56.8 million, and €29.0 million revenue respectively in 2013. </li>
</ul>
<h2>
<b><span style="color: red;">And then there were 12 proven winners</span></b></h2>
The revenues didn't stop rocketing higher come 2014. Although this time where there once stood 11 proven winners, a 12th did emerge; Foodpanda/Delivery Hero with €6.7 million in revenue and €34 million in EBITDA losses.<br />
<br />
The grand total revenues of the <strike>11</strike> 12 proven winners climbed to c. €1,288 million* in 2014 . The EBITDA losses came in at a mere c. €586 million*. <br />
<span style="font-size: x-small;">*my estimates on an annual average respective euro rate basis to each winner.</span><br />
<span style="font-size: x-small;"><br /></span>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA0xIMR99Sozi3dVXCvoHK3dFPKe0j7r5GMd3zPV9BLhzhxu0IsjLkzuoyKNRUzpY_bodn_sE82fH9OduSTCSU2GmWTu-8J93ctw-e8ix7FcJ9CgcspikquUSjb43X1y3G1YAHUe0v3vM/s1600/RKET+12+winners+revenue.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgA0xIMR99Sozi3dVXCvoHK3dFPKe0j7r5GMd3zPV9BLhzhxu0IsjLkzuoyKNRUzpY_bodn_sE82fH9OduSTCSU2GmWTu-8J93ctw-e8ix7FcJ9CgcspikquUSjb43X1y3G1YAHUe0v3vM/s400/RKET+12+winners+revenue.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Rocket Internet's 12 proven winners cumulative revenue and EBITDA,</span><br />
<span style="font-size: x-small;">my estimates in €m based on annual average respective FX rates</span><br />
<i><span style="font-size: x-small;">Source: Rocket Internet annual report and prospectus</span></i></td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipJV31qOSl8K-fCraRQMTPuGrYO1kgaEujotHrsubcBiazZf8NTqC_l3VHvNeUy5l9npPIdLM14uEqmuOkTVh0gEw7rjWoxJXHwMJ7hYWNK27QdMVkDfGPdU8T9HN0PtvWeIxWkLdRB_c/s1600/RKET+12+winners+revenue.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipJV31qOSl8K-fCraRQMTPuGrYO1kgaEujotHrsubcBiazZf8NTqC_l3VHvNeUy5l9npPIdLM14uEqmuOkTVh0gEw7rjWoxJXHwMJ7hYWNK27QdMVkDfGPdU8T9HN0PtvWeIxWkLdRB_c/s400/RKET+12+winners+revenue.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Rocket Internet's 12 proven winners individual revenue, </span><br />
<span style="font-size: x-small;">my estimates in €m based on annual average respective FX rates</span><br />
<i><span style="font-size: x-small;">Source: Rocket Internet annual report and prospectus</span></i></td></tr>
</tbody></table>
Yet again, it was not even as if there was one single profitable concern among the winning 12.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivK6g73onUXxAS-_1G2Crfh5nZ02wTmlJAsxLOlgNeb3fFY57MRnE3mJP-1gwxGDdmEPP3PkabaDS3eynfJQ-tWL5xtglLhyv2maDIWCVaCmRe0i8jjbwvAsbCy_Y8vLlE_D1BVs4XBwk/s1600/RKET+12+winners+EBITDA+by+company.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivK6g73onUXxAS-_1G2Crfh5nZ02wTmlJAsxLOlgNeb3fFY57MRnE3mJP-1gwxGDdmEPP3PkabaDS3eynfJQ-tWL5xtglLhyv2maDIWCVaCmRe0i8jjbwvAsbCy_Y8vLlE_D1BVs4XBwk/s400/RKET+12+winners+EBITDA+by+company.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><div>
<span style="font-size: x-small;">Rocket Internet's 12 proven winners individual EBITDA,</span></div>
<div>
<span style="font-size: x-small;">my estimates in €m based on annual average respective FX rates</span></div>
<div>
<i><span style="font-size: x-small;">Source: Rocket Internet annual report and prospectus</span></i></div>
</td></tr>
</tbody></table>
<h2>
<span style="color: red;">Zalora - a winner</span></h2>
One of Rocket's winners is Zalora.<br />
<br />
Zalora sells shoes and fashion online in Singapore, Malaysia, Indonesia, Thailand, Philippines, Vietnam, Hong Kong, Australia and New Zealand.<br />
<br />
As can be seen in the table below, Zalora was valued at c. €524 million when Rocket came to market. Further, while Rocket had invested c. €2.6 million into Zalora, total funding into the business stood at c. €292 million. In light of the ongoing losses (highlighted further below) that Zalora has incurred since, one would expect this funding has increased further. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhajvhpNGb8wVMBBYqHxah_6jagm2qAAk2OQYhvOoG7VgnwpE613u9PWXX4DGulouKuvkZjKB_eL0VplzmJ50QTJEjW90mP6qYXkB518SMyh_ZlBxPbCvEjphDWfudojq-boscDdyMv2IY/s1600/11+proven+winners.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="376" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhajvhpNGb8wVMBBYqHxah_6jagm2qAAk2OQYhvOoG7VgnwpE613u9PWXX4DGulouKuvkZjKB_eL0VplzmJ50QTJEjW90mP6qYXkB518SMyh_ZlBxPbCvEjphDWfudojq-boscDdyMv2IY/s640/11+proven+winners.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Information on proven winners, including valuation in the last financing round</span><br />
<span style="font-size: x-small;">(last portfolio value - LPV) leading up to IPO, and the corresponding value of</span><br />
<span style="font-size: x-small;">Rocket's direct and indirect stakes in the proven winners</span><br />
<i><span style="font-size: x-small;">Source: Rocket Internet Prospectus</span></i></td></tr>
</tbody></table>
As highlighted above and shown in the chart below, Zalora's revenue had risen to c. £95 million in 2014 (my estimate on an annual average £:€ basis). This is especially good going, since Zalora had de minimis revenue in 2012.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQfAyRtocMdkt4nATBnDQi4Ad_PAOWYpQnko4X_D7tL8u75gE0U6sh4p5ctJdmzWPni4UjNrJZDQJ5pCJav4mKM2IcXVoLEolwu6yORtfvJ3l6sWIJXBXtXSXYlchgrnw0g3F-PY748qk/s1600/Zalora+revenue+1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="218" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQfAyRtocMdkt4nATBnDQi4Ad_PAOWYpQnko4X_D7tL8u75gE0U6sh4p5ctJdmzWPni4UjNrJZDQJ5pCJav4mKM2IcXVoLEolwu6yORtfvJ3l6sWIJXBXtXSXYlchgrnw0g3F-PY748qk/s400/Zalora+revenue+1.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Zalora revenue - in £ million <br />my estimates on an annual average £:€ basis<br /><i>Source: Rocket Internet 2014 annual results presentation & prospectus</i></span></td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
To put this into some perspective, ASOS (ASC LN, mkt cap £3.2 billion) began its trading at the turn of the 21st century. It took ASOS around a decade to get to £43 million in sales. Zalora did twice that in three years.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsb9T8YVte39VYepIHTynMy-sg46_XJpnQNKkXT967kfC8vL92mNSizjjUFpcBav3g6dpJxduJQp_uVY-7b8dx6yBIMv2Ddci6uOFl8czYGXGrmT5WdDJzA2qeF8OaaQNs5iQEzvrf9zk/s1600/Zalora+revenue+1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsb9T8YVte39VYepIHTynMy-sg46_XJpnQNKkXT967kfC8vL92mNSizjjUFpcBav3g6dpJxduJQp_uVY-7b8dx6yBIMv2Ddci6uOFl8czYGXGrmT5WdDJzA2qeF8OaaQNs5iQEzvrf9zk/s400/Zalora+revenue+1.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Zalora's revenue progression as compared to ASOS' revenue progression from start-up<br />ASOS began in 1998 while Zalora was created in 2012</span><br />
<i><span style="font-size: x-small;">Source: Bloomberg, ASOS & Rocket Internet annual reports and prospectuses</span><span style="font-size: 12.8000001907349px;"> </span></i></td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
Now one might argue that ASOS began from a standing start in the early days of the advance of the internet and in one single country; the UK. However, the internet was pretty much in full swing by 2008, when ASOS began to grow its European business in Denmark, Sweden and Ireland. ASOS then created country specific sites for Germany and France in 2010, and a year later in 2011 it added Spain and Italy to its country tailored offering; the big four of the EU.<br />
<br />
And despite having all the technological know-how, experience from over a decade of trading in the UK, and supplier relationships to name but a few of ASOS' advantages, Zalora managed to broadly reach the level of sales in less than three years for which it took ASOS over five in Europe. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPZGxeFcqckqOJdXWfUSmXPYDoABKS8Jm1h3QUOVOX_xNRRgXikT7Io73wRdYBuODfP-uEayQiJvmvNrwrCPwd4JgbZyBLhUKj6kdbZvZwyzeXsz_J0ivpw8H_ZY7LWnjhePKPXCXmpB4/s1600/Zalora+vs+ASOS+EU+1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="233" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPZGxeFcqckqOJdXWfUSmXPYDoABKS8Jm1h3QUOVOX_xNRRgXikT7Io73wRdYBuODfP-uEayQiJvmvNrwrCPwd4JgbZyBLhUKj6kdbZvZwyzeXsz_J0ivpw8H_ZY7LWnjhePKPXCXmpB4/s400/Zalora+vs+ASOS+EU+1.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;">Zalora's revenue progression as compared to ASOS' EU related revenue progression from start-up<br />ASOS began to target European markets in 2008, while Zalora was created in 2012<br /><i>Source: ASOS & Rocket Internet annual reports and prospectuses</i></span></td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
But then one might suppose that Zalora's rapid growth was perhaps driven by the fact that it had access to c. 575 million potential customers across the Asian markets^ it had targeted. Whereas ASOS had access to <i>only</i> c. 274 million by way of the major markets in the EU. <br />
<span style="font-size: x-small;">^Malaysia, Brunei, Philippines, Thailand, Singapore, Hong Kong, Vietnam, Indonesia, Australia and New Zealand. </span> <br />
<br />
However, what Zalora's Asian exposure makes up for in sheer population, it possibly loses in terms of GDP per capita and internet access.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf0Xq4ERNfnj9YMCvcveSoUc36X5BUAK9Q9-bzLvjDLasQKDLvn5knPWSwtZPsIxUnjui6EJloY8hKwTX2oqYibxW1786IfyfCyXjvT8VI2UQXdGa3x579lo_N88qXjNtXYPI5_12a0vY/s1600/Zalora+bubble+chart+1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf0Xq4ERNfnj9YMCvcveSoUc36X5BUAK9Q9-bzLvjDLasQKDLvn5knPWSwtZPsIxUnjui6EJloY8hKwTX2oqYibxW1786IfyfCyXjvT8VI2UQXdGa3x579lo_N88qXjNtXYPI5_12a0vY/s400/Zalora+bubble+chart+1.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Zalora's markets as compared to ASOS EU markets - <br />
internet users per 100, GDP per capita (US$), and population (relative bubble size)<br />
<i>Source: The World Bank, ASOS & Zalando annual reports</i></td></tr>
</tbody></table>
In fact while Indonesia. Thailand, Philippines and Vietnam may well have populations greater than those of Germany, France, Spain and Italy, they also have GDP per capita rates of less than US$6,000, as compared to the EU nations where it ranges from c. US$29,000 for Spain, to as high as c. US$46,000 for Germany, and higher still for Denmark and Sweden. In Indonesia's case, which has the largest population by far, its GDP per capita is as low as c. US$3,500, while in Philippines it is lower still at c. US$2,800 and in Vietnam lower again at just c. US$1,900.<br />
<br />
Further, internet access per 100 of the population is generally below 50% in Zalora's markets as compared to rates in the 70's to 90's for ASOS's EU exposure. According to the World Bank it is as low as 16% in Indonesia.<br />
<br />
All this makes Zalora's growth relative to ASOS's endeavors in the EU even more impressive.<br />
<br />
I will follow up shortly.<br />
<br />
In the meantime, the <a href="http://ftalphaville.ft.com/meet-the-team/dan-mccrum/" target="_blank"><span style="color: cyan;">FT's Dan McCrum</span></a> has written some good posts on Rocket that are well worth a read:<br />
<br />
<a href="http://ftalphaville.ft.com/2015/03/26/2121723/whats-aboard-the-rocket/" target="_blank"><span style="color: cyan;">Rocket from the shelf</span></a><br />
<a href="http://ftalphaville.ft.com/2015/02/13/2119036/this-is-nuts-enjoy-your-trip-to-the-moon/" target="_blank"><span style="color: cyan;">This is nuts. Enjoy your trip to the moon</span></a><br />
<br />
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-61730645618198803292015-06-03T07:31:00.000-07:002015-06-03T07:40:18.093-07:00Apps, Apps, Apps, Apps ...<div style="text-align: right;">
<span style="font-family: inherit;">Wednesday 3rd June 2015</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Each week I will typically see between three to six
companies that are either looking to raise capital or that are on the road to raise their profile and expectantly their share price. No doubt I could see more
but six is quite enough for me over a five day stretch. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Companies will range in stages from early private start-ups,
to pre-IPOs, IPOs, or already AIM and fully listed ones. Sizes vary from micro-cap
to medium-ish. Venues will be an assortment from a quick chat in a
coffee shop, to a decent lunch in the City/West End, or a less decent group
lunch (think a tray of curled up cheese and pickle sandwiches, washed down with
sickly sweet concentrated orange juice in a broker’s clammy office), or a
presentation that may last an eternity … in a broker’s clammy office.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">The companies I meet will also be an eclectic mix. In
general, the only sectors I won’t meet are anything to do with oil and
gas or pharmaceutical, of which I will never understand either.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Lately however, it seems that almost every
other company being promoted has something to do with an app or an internet based
solution. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Yesterday for example, I met two. Both were private
concerns; company A and B.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Company A was focused on some sort of solution through a
mobile device for ordering coffee, food, room service, etc, thus avoiding
waiting in line. </span>I'm not convinced this is a problem requiring a solution but was open to persuasion. <span style="font-family: inherit;"> </span><span style="font-family: inherit;"> </span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Company B </span>centered<span style="font-family: inherit;"> on an app with the aim of connecting
brands, influencers, artists, and celebrities with the great unwashed. The latter who will no
doubt wonder what came over them when ogling some celebrity’s contribution to
the webisphere and suddenly being clocked by a canny advertiser. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Neither A nor B had any revenue. Material revenue for each
was unlikely for at least two years if their projections were to be believed. They seemed ambitious. Of course three years in and their projected revenues were off the charts. Each was therefore loss making for the foreseeable future. Company B was significantly so; apparently
burning through c. £350,000 per month, which was only likely to increase, I
think £500,000 per month was mentioned.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Neither seemingly had a unique business model, high barriers
to entry, or first mover advantage. Company A, openly acknowledged that it had
at least five competitors (in the UK) vying to take over its market that it was aware of. And
that they had much deeper pockets. I felt as though far from a parallel universe
there was probably another fellow bald investor being pitched to by a broadly similar company not two doors away, or at least in Paris, Frankfurt and New York.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">As for company B, I’d actually met a similar app based company to
B’s business over breakfast in February last. It too had the lofty ambition of monetizing a
connection between high profile earthlings and hoi polloi. I did not invest. And thankfully so, as having this morning checked on its progress it would appear it’s come to a less than distinguished
“pivot”?!?</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGIeYKMoAiLaTccZumObonGTr9D7ggFSFBD6r2y6erzkc8qwyFxJJGWfe-2zrTGRMb31c2IghEUlFPuh0rmIH49irbpErej6IAxQUtO1lRAxYgkA2UU3nwxHDqmgaKUVEExPSVQ-Wvgq8/s1600/Mobio+Insider.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="256" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGIeYKMoAiLaTccZumObonGTr9D7ggFSFBD6r2y6erzkc8qwyFxJJGWfe-2zrTGRMb31c2IghEUlFPuh0rmIH49irbpErej6IAxQUtO1lRAxYgkA2UU3nwxHDqmgaKUVEExPSVQ-Wvgq8/s400/Mobio+Insider.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Mobio INsider - connecting Brands and Influencers with <strike>hoi polloi</strike> a greater audience<br />
<i>Source: www.mobioinsider.com</i></td></tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">In the case of company B, I was particularly amazed at its
cash burn. It was clear that repetitive funding rounds would be required and likely in
short order.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">A Google search later and it would appear that again, this
has also been tried and tested and less than successful endeavour. For example, it
seems a US based company came up with an app, WhoSay, founded in 2010. WhoSay
raised $12 million in July 2012, funded by such backers as Greylock Partners,
Amazon, and various others ... <b><u>Amazon!</u></b></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaB-LQNLL6GjXDwv63Zg1u9Zjk21_g13sR2-8dpv7DgIC-GZM5mMvakuK02LqPzB11GGZG2TYbG14TGLEAowxKijwLvuwk5GccFiGAJRlcCGHBU111TX24H67XJBzDAtwvJz7pdTBvQxQ/s1600/WhoSay.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="342" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaB-LQNLL6GjXDwv63Zg1u9Zjk21_g13sR2-8dpv7DgIC-GZM5mMvakuK02LqPzB11GGZG2TYbG14TGLEAowxKijwLvuwk5GccFiGAJRlcCGHBU111TX24H67XJBzDAtwvJz7pdTBvQxQ/s400/WhoSay.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">WhoSay - connecting high profile earthlings with <strike>hoi polloi</strike> fans<br />
<i>Source: http://techcrunch.com/2012/07/24/whosay-raises-12-million-for-its-celebrity-centric-social-network/</i></td></tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">In the three years since its $12 million funding round it
would seem that WhoSay has managed to muster a somewhat unremarkable 69,000
downloads of its app on an iPhone device. Goodness knows what WhoSay was valued
at in July 2012. I reckon I can take a decent guess at its valuation in June
2015.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuMG6kCz0AvXaeWr8cRC14128F_ClFf61PuTajWNgsnXqETymk3Z9H8De01-UDuAqaWCf94xzkowYkIp8J8gKShm4gX6h1bo744WwnItrm6k2aO2XCWeJWkEYFwtP-S4t1fJ-c_u6mEdE/s1600/WhoSay+downloads.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="268" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuMG6kCz0AvXaeWr8cRC14128F_ClFf61PuTajWNgsnXqETymk3Z9H8De01-UDuAqaWCf94xzkowYkIp8J8gKShm4gX6h1bo744WwnItrm6k2aO2XCWeJWkEYFwtP-S4t1fJ-c_u6mEdE/s400/WhoSay+downloads.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">WhoSay - app downloads to iPad<br />
<i>Source: www.xyo.net</i></td></tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">Company A and B were being promoted with what I reckoned to
be preposterous valuations. Whether they will be successful in obtaining the capital
sought at their respective valuations is to be seen.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: inherit;">My general conclusions are that:</span></div>
<div class="MsoNormal" style="text-align: justify;">
</div>
<ul>
<li><span style="font-family: inherit;">There’s increasingly too many of these types of companies being promoted.
Highly speculative, low barriers to entry, high cash burn, considerable
competition, crazy valuations.</span></li>
<li><span style="font-family: inherit;">On the flip side, I would like more of these types of companies to come to the public markets thereby offering juicy short opportunities. </span></li>
<li><span style="font-family: inherit;">If there are investors that are willing to invest in these
promotions at such valuations, they will need seriously deep pockets and are
most likely crazy. In my experience, crazy people don’t maintain their deep
pockets for long. </span><span style="font-family: inherit;"> </span><span style="font-family: inherit;"> </span></li>
<li><span style="font-family: inherit;">The rate at which these companies are now being promoted is
likely causing some form of crowding out effect on proven prospects that
have a far higher chance of success, albeit with a less racy blue sky outturn.
Nonetheless the total expected return is most probably far higher along the
proven course and being crowded out is a shame for better quality businesses and the economy in general.</span></li>
<li><span style="font-family: inherit;">I may have to add app based businesses to oil & gas, and
pharmaceutical ones to avoid.</span></li>
</ul>
<br />
<div class="MsoNormal" style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog.</span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com1tag:blogger.com,1999:blog-9008707982090470413.post-47368873087966127872015-05-21T05:57:00.000-07:002015-06-23T11:41:40.753-07:00Maniacal director purchases and really lazy longs<div style="text-align: right;">
Thursday 21st May 2015</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
In the light of the latest plunge in its share price and reflecting upon the maniacal director buying shortly after I raised a bearish view on Tungsten (TUNG), I thought it apropos to re-post the following offering on director purchasing:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<a href="http://lordshipstrading.blogspot.co.uk/2014/07/director-purchases-and-sometimes-lazy.html"><span style="color: cyan; font-size: large;">Director purchases and sometimes lazy longs</span></a></div>
<div style="text-align: justify;">
<br /></div>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj81e7FbwFoeOM_nly8v13XcacWOSFNt5HoudYVEnrMorjwXqXp0rAWyrdqa6H3wIAycextOXe-kXu5UcFJpSWvSuA_6DWEy4-fJyqj04zpwxRePIw3NzvNYMReLO7gFXYWJe9OJtjtw8E/s1600/Maniacal.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj81e7FbwFoeOM_nly8v13XcacWOSFNt5HoudYVEnrMorjwXqXp0rAWyrdqa6H3wIAycextOXe-kXu5UcFJpSWvSuA_6DWEy4-fJyqj04zpwxRePIw3NzvNYMReLO7gFXYWJe9OJtjtw8E/s400/Maniacal.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Tungsten Director purchases<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZiUeKyFHBc1xTgqaHljRqFqM3AuTL4mTdMkLTTZEDox_BtAHHKUjb9NilB1AQp-U-hmQnBs_seo2wdkuq-er4ZjMLRRhZilUl33A-SaCUyvpT_-tFTjb8GR6F0cZdWSMnVVd2D5MZpZ4/s1600/Lazy+longs.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZiUeKyFHBc1xTgqaHljRqFqM3AuTL4mTdMkLTTZEDox_BtAHHKUjb9NilB1AQp-U-hmQnBs_seo2wdkuq-er4ZjMLRRhZilUl33A-SaCUyvpT_-tFTjb8GR6F0cZdWSMnVVd2D5MZpZ4/s400/Lazy+longs.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Tungsten major shareholders<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQJU_aIe1Mo67Mpprx7wv6qtPLmTEB4SErIBhgaflS8D8DE8KTPXBFcWYQmyN-M85G7JouG20R4bsjuGp2pQeB0ShgvnrQBqNYSNG0WWRzoHnkqAIFHts4KTLqx8dhJtcmbsz_uYO-rFc/s1600/TUNG+share+price+May+2015.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQJU_aIe1Mo67Mpprx7wv6qtPLmTEB4SErIBhgaflS8D8DE8KTPXBFcWYQmyN-M85G7JouG20R4bsjuGp2pQeB0ShgvnrQBqNYSNG0WWRzoHnkqAIFHts4KTLqx8dhJtcmbsz_uYO-rFc/s400/TUNG+share+price+May+2015.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Tungsten share price<br />
<i>Source: Bloomberg</i></td></tr>
</tbody></table>
<div style="text-align: justify;">
I have closed my short. </div>
<br />
<div style="text-align: justify;">
<span style="line-height: 115%;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: x-small;">Disclaimer:
The information, discussions or topics referred to on this blog should in no
way be considered “advice” to buy or sell anything. The information which may
be referred to is freely available in the public domain and where required the
source of information is referenced to for verification. While every effort has
been made to ensure the veracity of any information contained within this blog,
the author accepts no responsibility for the accuracy of any information
contained within this blog or for the sources of information which may be
referred to. Readers are responsible for their own actions and interpretation
of the information contained within this blog. </span></span></div>
Matthew Earlhttp://www.blogger.com/profile/10684772444875206973noreply@blogger.com0