Nice article. I'd imagine the thing that is scaring the market. Here is the huge drop in YoY revenue. But this seems like a compelling GARP pick if we think that we are experiencing some COVID pull forward and growth is going to resume.
As someone not from the UK, I'm interested in if you have any context on the culture around card giving in the UK? As a US resident I'm surprised to hear that the overall card market is expected to grow.
Just read through some of their latest reports. They claim the average Moonpig customer sends 24 cards per year from all sources. That seems insane to me. I can't imagine sending that many cards.
Also after reading through the report the latest financial reports and thinking about it a bit. It seems likely that the company is likely in for some pain on the next financial report. The next reporting period March 2022-Oct 2022 seems like it will continue to be painful, since this is the first reporting period the UK will have been fully out of lock downs.
One question on the DCF why do you think the long term tax rate will be 22%. From the annual report. "The Group’s effective tax rate is thereafter likely to rise as it will be
impacted by the announced increase in the UK statutory rate of corporate tax from 19.0% to 25.0% with effect from 1 April 2023."
I'll list some other facts I scraped from both the Group's and CF's reports below, which seems easiest:
- 73% of UK adults purchased >1 gift card in 2021, with 811 million cards sold (147 million, or 18%, via online channels).
- 72% of cards in the UK are given with a gift.
- Active customers purchase circa 20 cards through all online and retail channels. I agree, this seems like a lot. But consider sending similar cards to 2-3 people each calendar event and it becomes more accessible. Out of these 20, we can assume 3 are from Moonpig and about 6 from CF (based on their rough volume share).
- 90% of card purchases are driven by recurring calendar events.
- There's almost a perfect demographic balance in card purchases based on age, though 60% are sent by females.
I hope these figures give you a better insight into the market. As to the short-term pain, I don't expect the results to be poor per se, but we will see. To be cautious, I'm building half the position now, and will decide whether to double down when they publish H1 23 results on Dec. 7th. The tax rate of 22% was a simple and conservative back-of-the-envelope approximation, but it doesn't have a big impact on the intrinsic value.
Some obvious yet overlooked observations made on how retention in the greeting gifts business is underpinned by the natural driver of reoccurring dates—and of course… Data! Arguably already a household name, still, Moonpig may style growth stock pickers. But first, they’ll have to be sure the online push doesn’t underwhelm!
Nice article. I'd imagine the thing that is scaring the market. Here is the huge drop in YoY revenue. But this seems like a compelling GARP pick if we think that we are experiencing some COVID pull forward and growth is going to resume.
As someone not from the UK, I'm interested in if you have any context on the culture around card giving in the UK? As a US resident I'm surprised to hear that the overall card market is expected to grow.
Just read through some of their latest reports. They claim the average Moonpig customer sends 24 cards per year from all sources. That seems insane to me. I can't imagine sending that many cards.
Also after reading through the report the latest financial reports and thinking about it a bit. It seems likely that the company is likely in for some pain on the next financial report. The next reporting period March 2022-Oct 2022 seems like it will continue to be painful, since this is the first reporting period the UK will have been fully out of lock downs.
One question on the DCF why do you think the long term tax rate will be 22%. From the annual report. "The Group’s effective tax rate is thereafter likely to rise as it will be
impacted by the announced increase in the UK statutory rate of corporate tax from 19.0% to 25.0% with effect from 1 April 2023."
Jacob, thanks for your comments.
I'll list some other facts I scraped from both the Group's and CF's reports below, which seems easiest:
- 73% of UK adults purchased >1 gift card in 2021, with 811 million cards sold (147 million, or 18%, via online channels).
- 72% of cards in the UK are given with a gift.
- Active customers purchase circa 20 cards through all online and retail channels. I agree, this seems like a lot. But consider sending similar cards to 2-3 people each calendar event and it becomes more accessible. Out of these 20, we can assume 3 are from Moonpig and about 6 from CF (based on their rough volume share).
- 90% of card purchases are driven by recurring calendar events.
- There's almost a perfect demographic balance in card purchases based on age, though 60% are sent by females.
I hope these figures give you a better insight into the market. As to the short-term pain, I don't expect the results to be poor per se, but we will see. To be cautious, I'm building half the position now, and will decide whether to double down when they publish H1 23 results on Dec. 7th. The tax rate of 22% was a simple and conservative back-of-the-envelope approximation, but it doesn't have a big impact on the intrinsic value.
Some obvious yet overlooked observations made on how retention in the greeting gifts business is underpinned by the natural driver of reoccurring dates—and of course… Data! Arguably already a household name, still, Moonpig may style growth stock pickers. But first, they’ll have to be sure the online push doesn’t underwhelm!
Thanks Arsen, any experience using their platform?