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THE YIELD: Did an AFR Article Cause a Trading Halt? Who Are Investors Shunning?
Our weekly overview of the ASX e-commerce market. Are investors falling out of love with Aussie marketplaces? And what happened with Cettire?
The last week in the ASX has seen some major upheaval, with relatively unknown e-commerce pureplay retailer Cettire announcing a trading halt yesterday morning. Power Retail broke the news of the announcement after Cettire shares dropped 30.4 percent to $1.755, and then climbed back up to $1.98 (-21.43%), triggering a trading pause.
The sharp decline follows publication of an article in the AFR last Friday that reported fund managers who bought into Cettire’s $65 million initial public offering were worried about the company’s ‘longer-term prospects’. Cettire shares peaked at $2.86 last week, closing at $2.52 last Friday, before their dramatic plummet.
On Tuesday afternoon, Cettire responded to questions put to it by ASX, stating, ‘Cettire has confidence in the sustainability of its supply chain and authenticity of the products available on its platform. Cettire sources products from a large and diversified global network of suppliers with what it believes is minimal concentration risk.’
It also updated its sales revenue estimate to $85 million.
In its response, it dismissed claims made in the AFR article, reiterating that its proprietary core technology stack is a key point of differentiation, and that it does not have any material exposure to Google organic search algorithms. It also said that its platform not being currently accessible in certain markets is to prioritise global expansion (and not to prevent brand owners from seeing its pricing).
‘This is a business growing sales by more than 300% and will do $100m of revenue, but probably close to no EBIT,’ says Adir Shiffman, E-Commerce Founder and Investor, Chairman of Sleeping Duck. ‘So it’s a complete bet on the future. This means it will be highly volatile and swing based on market sentiment. I think it’s less about any change in the opportunity, and more that businesses like these are effectively a mirror that reflects investors’ fear and greed at any point in time.’
In its December 2020 prospectus, Cettire was transparent that it ‘relies on a number of suppliers and service providers’ and that it ‘does not have exclusive arrangements with branded goods suppliers and there is a risk that Cettire may be unable to continue to source products from existing suppliers, and to source products from new suppliers in the future, on commercially acceptable terms.’ The Prospectus specifically states that ‘suppliers which Cettire uses to fulfil customer orders have their own supply arrangements with manufacturers of the relevant products.’ Essentially, the information contained in Cettire’s ASX response reinforces the disclosures made in its December Prospectus, while upgrading its projected sales revenue figures
‘It’s all sentiment, there’s nothing new,’ Shiffman tells Power Retail.
In contrast to the dramatic Cettire crash, overall we’ve seen share price stabilising. After its May dip (dropping to $3.59 on 19 May 2020), Adore Beauty closed out at $4.55 on 14 June 2020. It may be a 9% drop over 60 days, but it’s also 33% growth over 30 days, which is a good sign. Similarly, Kogan’s share price has dropped 20.2% over 60 days, but is making gains, repeatedly recording over 6% growth at the 30 day, 14 day and 7 day mark. We may not be seeing the seismic growth of 2020, but we’re definitely not seeing evidence that the post-pandemic new normal is a place of digital doom and gloom.
Of the e-commerce players we’ve noted, Bike Exchange is the only one that has recorded repeated growth at the 60 day (2%), 30 day (4.2%), 14 day (2%) and 7 day (4.2%) mark. It may be slow growth, but there’s something comforting about consistency after a year of reactivity. Booktopia is also showing signs of consistency and while it’s had minor dips in the last week or so (-1.2% in the last 14 days), overall it’s sitting steady at 4.5% over 60 days. The Temple & Webster share price tells a similar story, dropping by 2.9% over 60 days, recovering slightly with around 3% growth over the last month and again the last fortnight. Whether this is maintainable is something to watch, dropping 6.1% in the last 7 days.
In contrast, MyDeal and Redbubble’s share pricing has dropped pretty clearly in the last three months (MyDeal at -30.8% and Redbubble at -40.7%) as investors shun these Australian marketplaces.
The ASX 200 experienced 1.9% share price growth overall in the last fortnight, yet the average of e-commerce companies mentioned recorded an average of 4.1% growth in the same period (31 May to 14 June). So despite skepticism about e-commerce businesses being overvalued, listed online retailers are on average out-performing their ASX 200 counterparts.
Overall, while May recorded a slight dip in e-commerce revenue, according to recent Power Retail data, June and July are set to grow year-year (even on top of the pandemic growth of 2020). For June 2021, e-commerce revenue is forecast at $4.20B, which is an impressive 20.68% growth year-on-year (especially encouraging after May’s 9.25% year-on-year dip). With the latest growth figures coming in, this puts ASX-listed online retailers in a good position in the coming weeks and months.
Shiffman believes that of any market in the world, ASX investors have an odd relationship with e-commerce. ‘Growth investors are the dreamers,’ he explains, ‘but ASX investors sometimes dream about industries where other markets have long ago fallen out of love. Fast growing but profitless e-commerce is one of them.’
Figures are current as at close of ASX on 15 June 2021. This is analysis only and not intended as investment advice.