AuMake International Limited (ASX: AU8) is a retail store chain, which connects Australian suppliers, with influential Daigou (or to buy on behalf, which describes the practice of buying the most sought after items) and Chinese tourist markets. The growing distribution network of AuMake and Kiwi Buy retail (its e-Commerce store), with strategic partnerships with JD.com and Chemsave is helping to further grow the brand.
On 7th March 2019, the company presented its Investors update, and strategic outlook presentation. The company had seen major growth in sales. The Total sales have more than doubled up and was up by 142% to $21.8 million in 1HFY19 from $9.02 million in 1HFY18. The gross profit saw an even higher jump from $1.12 million in 1HFY18 to $4.2 million in 1HFY18, a massive increase of 274%. According to the company, the increase in sales, and gross profit were due to faster cash investment to gross profit conversion rate, and increased customer visits.
The total operating expenses increased by almost 183% from $2.4 million in 1HFY18 to $6.8 million in 1HFY19 buy the gross profitability significantly outgrew operating expenses. The normalised operating expenses as a percent of sales decreased from 33% in 2HFY18 to 31% in 1HFY19. The reported net cash used for operating activities decreased from $2.68m in 1HFY18 to $2.06m in 1HFY19, while receipts from customers increased significantly during the same period from $8.94 million to $21.91 million.
The numbers of same-store growth were also impressive. The growth was seen up by 30% in sales to $8,290 in 1HFY19 from $6,380 in 1HFY18 and resulting gross profit was up by 71% from $718 in 1HFY18 to $1,230 in 1HFY19. The company’s own branded sales were also up by massive 424% from 1HFY18 to 1HFY19. It is confident of the inherent value of the brand and foresees a potential opportunity to sell these brands in the future.
The total market value of the cross- border retail market in Australia is estimated to be around $1.5 billion p.a to $2 billion p.a, out of which AuMake has gained a market share of around $50 million p.a through its 13 stores in Sydney, Australia. Currently, there Is no dominant player in Australia or New Zealand, according to the company. With this, the company is assessing the expansion opportunities in Australian and New Zealand capital cities which will be led by Low store setup capital requirements to establish highly profitable stores in key new markets. Once, this has been achieved then AuMake would have the opportunity, to be the dominant retail brand in both Australia and New Zealand which would be leveraged to seize opportunities in China.
The company has also discussed its strategic outlook, stating that they had significantly progressed in last six months with AuMake achieving milestones like:
- To generate profits well in excess of operating expenses.
- To develop a profitable and scalable business model in a highly competitive market etc.
- The company has an opportunity to be the dominant brand in Australia, and New Zealand cross border retail market.
- Leading toward a multitude of company changing opportunities in China.
- To be sufficiently capitalised to seize the opportunity.
As of 7th March 2019, the stock was trading 5% higher and closed atA$0.21 compared to the previous closing of A$0.20. The YTD return of the company is currently around -20%.
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