Dot points - to view alongside my valuation and bear case

Such a clean balance sheet and cash conversion. Of their 18m NPAT for FY22 they distributed 12.5m to shareholders and put 5.5m into new stores.

Experienced CEO, seems level headed, has skin in the game with 2.2m shares and 0.9m options. He purchased $250k worth in the middle of this year. Other directors have purchased on market too.

Its cheap. I have been conservative in my valuation and still can't get current market value. I think the market is worried about near term results and thinks it can be picked up cheaper.

Growth options in Aus, NZ, UK when the time is right. Disciplined approach so far, cash and profits available to grow without dilution or taking on debt.

They are well integrated in their supply chain, which I think gives them some control over pricing and margins

They seem to have good leverage with landlords, receiving support for upgrades and renegotiating leases

They've started FY23 with a 33% increase in revenue for the first 2 months (cycling COVID lockdowns). It's probably a low base given stores were closed and I doubt July-Aug are big months (xmas/mothers day/valentines would dominate), but this gives some confidence that my revenue assumptions are not too bullish.

I can see upside. $4 per share from DCF without anything heroic. Flat through to 2025 with margins taking a hit in that period, thereafter resuming 10% growth and 13% NPAT margins. This would require international expansion to work with revenue reaching about double FY22. This will be a great hold if that occurs.

Disc: I hold this in real life, am sitting on a loss and plan to buy more. 

Collection of bearish points - view with my valuation and bull points for balance.

Economic downturn due to interest rates likely to impact dusk. As discretionary homewares they're connected to the housing market and rates cycle. I think this is factored in the price (they're trading on trailing PE of 6 and that's in the 5's if you use enterprise value), however if they have a bad year in the coming few the price could still go lower and I'll have bought too early. 

Candles are not sexy for investors and whilst dusk point out they're not just candles, I think they will struggle to attract a premium and they could just go out of fashion.

Catalyst are selling out and still have more to go.

The eroma thing was disturbing, however I like it that they can back out of something that isn't right. Management are prepared to look silly to do the right thing for the company - this doesn't always happen.

It wont be a ten bagger in the foreseeable future.

Disc: I hold this in real life, am sitting on a loss and plan to buy more.