Retail company AuMake International Limited (ASX: AU8) operates AuMake and Kiwi Buy retail stores in Sydney and directly connects Australian suppliers to the Chinese consumers. The company is engaged with the daigou and Chinese tourist markets and offers varied products under 4 categories- skin, wool and leather products; healthcare (food and supplements); dairy products and baby food; and body care and cosmetics.
Today, on 27 May 2019, the company provided an update on the performance of the Broadway (recently acquired) and Kiwibuy businesses.
Since the announcement of the acquisition of Broadway, AuMake has been working closely with Broadway management to integrate the two businesses, with effective control over the Broadway business set to occur on 1 July 2019.
On 17 April 2019, AuMake announced to have reached an agreement to purchase assets (100%) of the affiliated inbound Chinese retail store network, Broadway, for a total consideration of $14.18 million, which is amortised in three stages (50% cash and 50% shares). As per the requirement, the company completed a $7 million of capital raising, to fund the acquisition as well as for working capital requirements.
With this extremely accretive acquisition, AuMake anticipates material improvement in the operational and financial performance for the financial year 2020.
Source: Acquisition of Broadway and Equity Raising Presentation
As reported today, Broadway management informed the stakeholders that the trading conditions during the 2019 June quarter, have been better than expected. As per the company, a record number of Chinese travel agencies have reached out to Broadway since the announcement of AuMake’s acquisition with significant momentum gathering for the September quarter. As a result, Broadway estimates a 30% rise in the number of Chinese travel agencies engaging with the Broadway as compared to the corresponding quarter in 2018.
Meanwhile, both companies have been actively developing strategies to increase average sales and gross profit per customer in the next quarter. These include:
- The reinvigoration of existing Broadway product mix through the addition of new brands including AuMake owned brand products;
- Introduction of logistics services into every Broadway store to enable customers to purchase more than the standard plane luggage allowance;
- The rollout of online sales functionality in Broadway stores for the first time.
AuMake is highly encouraged by Broadway’s recent financial and operational performance.
The acquisition of Kiwibuy store network in May 2018 was another significant move by AuMake and has been highly accretive, providing a gross rate of return of over 520% on investment. Since the acquisition, Kiwibuy has generated revenues of over $ 10.8 million and around $2.2 million gross profit with a gross margin of 20.4%, for the period between June 2018 and April 2019.
Of note, EBIDTA % of online sales was 2.4x EBITDA % of offline sales performance. Going forth, stimulating online sales growth is a crucial strategy for AuMake’s future progress.
As for the outlook ahead, the company confirmed that the group-wide aspirational revenue target is in excess of $ 100 million and materially positive EBITDA for FY20.
The company further notified about the General Meeting to be held on 27 June 2019, 10.00 am (AEST), at AuMake Daigou Hub, Haymarket NSW.
With a market capitalisation of around AUD 49.93 million and ~ 312.08 million outstanding shares, the AU8 stock price closed the market trading today (27 May 2019) at AUD 0.150, dipping 6.25% by AUD 0.010.
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