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1/ SSG VS BBN thread
Baby Bunting (BBN) is often cited as one of the best retailers in the country and commands a premium valuation of 25X FY21 NPAT. On the other hand, Shaver Shop Group (SSG) trades on less than 10X our FY21 forecast. Is the BBN premium warranted?
Baby Bunting (BBN) is often cited as one of the best retailers in the country and commands a premium valuation of 25X FY21 NPAT. On the other hand, Shaver Shop Group (SSG) trades on less than 10X our FY21 forecast. Is the BBN premium warranted?
2/ Share price
Both SSG and BBN listed around the same time 2015/2016, with almost the exact same number of shares on issue (125m) and similar initial share prices. But as can be seen below, the returns for shareholders have been far better for BBN. What is driving this?
Both SSG and BBN listed around the same time 2015/2016, with almost the exact same number of shares on issue (125m) and similar initial share prices. But as can be seen below, the returns for shareholders have been far better for BBN. What is driving this?
3/ Sales Growth
I was surprised to see SSG has a higher CAGR of 16.2% vs BBN of 14.4%
I was surprised to see SSG has a higher CAGR of 16.2% vs BBN of 14.4%
4/ NPAT Growth Fy16-Fy20
BBN 16.2% CAGR
SSG 9% CAGR
I think this explains the PE multiple differential in a nutshell. But how did BBN grow their bottom line faster than SSG when they have had lower revenue growth?
BBN 16.2% CAGR
SSG 9% CAGR
I think this explains the PE multiple differential in a nutshell. But how did BBN grow their bottom line faster than SSG when they have had lower revenue growth?
5/Part of the puzzle must come down to BBN competitors going bust a couple of years ago and BBN enjoying a 200 point increase in gross margin as a result. Was BBN just lucky?
6/ But these are backward looking metrics.
SSG has just announced 1H20 NPAT growth of 75-85%. This has been driven by margin expansion.
Perhaps some key omnichannel metrics highlight SSG will be as good a business as BBN going forward…
SSG has just announced 1H20 NPAT growth of 75-85%. This has been driven by margin expansion.
Perhaps some key omnichannel metrics highlight SSG will be as good a business as BBN going forward…
7/ On-line penetration
SSG 30.3% (as at 1H21)
BBN 20.9% (as at 1Q21)
SSG 30.3% (as at 1H21)
BBN 20.9% (as at 1Q21)
8/ Customer database
SSG: “our customer database now exceeds 600,000 members”
BBN: Not reported on
SSG: “our customer database now exceeds 600,000 members”
BBN: Not reported on
9/ Net Promoter Score
SSG 85.5
BBN 81
SSG 85.5
BBN 81
10/ Key questions for SSG
Is the growth in DIY personal care solutions sustainable in a post-COVID world? SSG appeared to be a COVID beneficiary with a huge 4Q20.
Can margins remain robust?
Is the growth in DIY personal care solutions sustainable in a post-COVID world? SSG appeared to be a COVID beneficiary with a huge 4Q20.
Can margins remain robust?
11/ Growth Without a large runway of new store rollouts, where will the growth come from? Can SSG successfully expand into new categories? At least BBN has a store rollout plan.
12/ Summary
Plenty of unknowns, but many metrics put SSG on a par with BBN. Perhaps the Fin Twit community can provide more colour the divergence in trading multiples?
Plenty of unknowns, but many metrics put SSG on a par with BBN. Perhaps the Fin Twit community can provide more colour the divergence in trading multiples?
