Disclaimer: I hold. For context I am down on my purchase price so my response below is not based on someone sitting on a multi-bagger but rather based on a decision to buy in for the medium to long term and thus, will give this time for my these to either play out or not.
I think in the recent month Wilson's selling would have had a significant impact. It's possible quite a few retail holders would have noticed this and wondered what's going on and followed Wilson's out the door. When we add on the recent state lockdowns and consequent store closures, and there is room for considerable apprehension regarding 21-22 first quarter sales for those looking at a shorter term hold.
With respect to those 200+ reviews no one I think can accurately draw any conclusion from those comments as they make up such a small sample size of the millions and millions of sales DUSK process in a year. Now, don't get me wrong some of those comments appeared to have a legitimate gripe whilst, others are clearly written by individuals who would complain if they felt they were cheated of 1mm from a super sized coke at Maccas. For me the true indication of the products appeal or non-appeal can be drawn from their membership base (growth if any and the like for like sales from those members = is it higher than the casual consumer and is it continuing to grow).
In terms of the quality of their products, I would like to think that with their margins, DUSK could quite comfortably source one of the higher level of product manufacturer in China and still make a very good profit.
Remember any variance in quality is not just a China thing because in China in the last 12m Tesla was the Company with the worse foreign company reviews and they had to front a hearing to answer questions and say how they would deal with the issues. So it's important for me to not assume because one sources a product from China it is automatically sub par or else I would struggle to buy almost anything from a shop.
Summary: the key metric for me is like for like sales from their significant membership base and the overall change in membership numbers. With respect to quality I would "like" to believe that a company that employs multiple fragrant developers and puts such effort into this area that they would then genuinely skimp on their other products. Consequently, should memberships drop significantly then customer reviews might be something I look closer at and if issues regarding poor quality surges into the 1000s or 10s thousands then I would be shooting an email off to the company for a please explain. However, at this stage their is enough in the info provided to this date to suggest DUSK will be significantly larger and more profitable in 5years than it is today.
Dusk, now on a trailing PER of about 7.6.
Mr Market thinks Dusk will be severely impacted by COVID-19 lockdowns heading into Christmas, with December being its strongest month. Mr Market may well be correct, but a business is not valued on one six month period alone.
The bear case:
The bull case:
To me, the question seems to be - will like for like store sales return to pre-COVID-19 levels beyond 2022? LFL sales growth of 49% from pre-COVID to COVID times is a significant jump. It really is hard to say how much LFL sales will contract as we transition to a COVID normal world.
A PER of 7.6 may well be justified until we see more data.....results out August 27.
DISC - I HOLD.
@Chalky1610
"Since listed in November 2020 DSK has announced several positive updates on the back of strong sales. If earnings can be sustained, then a forecast price/earnings multiple of below 9 times appears to be good value."
I think the whole argument with this company is around "If earnings can be sustained".
The year(s) in which DSK has IPO'd and had their financial performance monitored on the exchange has been during COVID. This period has seen some of the biggest short term changes to consumer spending ever witnessed.
In my opinion in belief DSK as similar to many other retailers [JBH, RBL, TPW etc] has benefitted massively from government stimulus and the aforementioned changes in consumer behaviour.
In saying that, I'm not selling the stock is not a good investment but merely giving a reason as to why the market is pricing on the company on a single digit P/E multiple, rather than something that reflects strong prior performance.
[From prior research, I passed on buying the stock when it IPO'd due to the private equity component and the use of the listing as a means of 'cashing out'. I'm also not a big fan of investing in retail stocks]
I had a good long read of the prospectus so here's my 2 cents;
1. The business taken at pure face value is just not sexy at all. A competitive industry and hard (if not impossible) to build an economic moat around a business that sells candles and things that smell nice.......
2. The estimates provided in the trading update on the 29/12 don't pass my sniff-test. EBIT margin going from 13% in FY20 to 23% in H121...???!!?!! I understand that most supplies come from china and hence the high AUD may have helped but not to that extent.
3. @Rapstar made a good point relating to the cylical nature of the business, and this may be putting off investors from jumping in. Predicting the revenues, NPAT's and EPS with the accelerated growth is seeming to be tough.
In saying that, my conservative figures found that this is trading on a p/e of 8x given a small amount of NPAT in H221 and a EV/EBITDA of 2x given that the cash balance of $33m is actually correct. Very cheap on typical multiple valuations and even though i find the business poor by economic nature, I think the risk/reward is decent at this level