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SRF - SurfStitch Group

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System

System

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SurfStitch is one of the leading pure play online Action Sports retailers globally. It is the only major pure play online Action Sports retailer in Australia and New Zealand, and has developed a growing presence in the European and the United States of America online Action Sports segments. SurfStitch provides over 700 brands and 30,000 products to consumers in more than 125 countries.

http://www.surfstitch.com
 
I am a loyal customer of Surfstitch. Brought many board shorts, rashies and various stuff for myself, dresses, bikinis and other stuff for my partners' daughter. Even a skateboard. I thought they were not listed despite of rumours of them wanting to list this year.

They often have great deals. I remember buying stuff from them when they were new and based in Sydney Northern Beaches. Then they moved to Gold Coast plus they have are establishing a presence overseas. I like wearing surfing gear.

Lots of work to do.
 
How did I missed this one? $1.00 per share, they want to raise over $83.2 million. Closing date is Fri 12 December 2014!!!!! Maybe I should have read thier emails more carefully instead of dismissing it. (Nah, I have enough for now, not interested in anymore sles for now.)

Maybe I should have stayed out of Medibannk Private and brought SurfStitch instead? (Dumb statement since I think MPL is OK, maybe not the best, but definitely not a dud.)

I must be blind, I am struggling to find real info on their IPO. Back in a few minutes.
 
I give up. Maybe I will look into this tomorrow. I can't find a Prospectus anywhere on their website.

Good Customer relations may not equal Good Investor relations. The surf industry is highly competitive. I doubt the margins are really there. I can not say any more since I can't find much news on SurfStitch (especially in front and not behind a firewall).

Strangely, I prefer to buy a wetsuit from an actual shop where I can try it on. I will not buy a surf board on line either. That's where I draw the line. Otherwise the other stuff I buy are great.
 
Faramir said:
I give up. Maybe I will look into this tomorrow. I can't find a Prospectus anywhere on their website.

Good Customer relations may not equal Good Investor relations. The surf industry is highly competitive. I doubt the margins are really there. I can not say any more since I can't find much news on SurfStitch (especially in front and not behind a firewall).

Strangely, I prefer to buy a wetsuit from an actual shop where I can try it on. I will not buy a surf board on line either. That's where I draw the line. Otherwise the other stuff I buy are great.
Click to expand...

I get my Ripcurl wetsuits out of UK (far cheaper but that could change with the falling AUD) and have been buying Firewires for a while (available online) although I purchase usually through the local surf shop (cheaper)usually get some thing off for deck pads, fins etc with the new stick.

But everything else I get online or in Bali :)


I think I got my tide watch through these guys had issues but they sorted it out good customer service as I remember.
 
Thank you Joe Blow. I have just quickly read over the Prospectus but I didn't read it properly (yet).

I missed out. The deadline is gone. Not sure if being busy today is a blessing or a curse as I had to help someone. I do not feel sad or anything because there is a lot for me to learn about IPOs.

SurfStitch is a company I love. Brought a number of items from them. Very fast delivery plus excellent service.

But I am going to show some things from their Prospectus:
Lots of Brackets. No Dividends. Lots of Acquisitions Overseas. Maybe someone can tell me that maybe I am better off holding onto my cash. I have been looking forward to this IPO for much of this year. How I found out one day too late???? Maybe it is a blessing for me?
 

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I don't mind no dividend. I understand that they are expanding rapidly.
My surfing skills are just like my investing skills - very basic.
 

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Emotions has made me fall in love with this IPO. The Prospectus is filled with lots of pretty pics of surfer girls. Realising that I can't get my head around their numbers, not knowing whether it is great or not great - that tells me that giving this IPO a miss is fine. Maybe SurfStitch will have a massive increase on its first day of trading just like Beacon Lighting (I missed out on Beacon Lighting since it was oversubscribed.) I am holding onto my cash for now. It is only an extra $14.95 of brokerage if I want to get SurfStitch later. Something tells me maybe I won't. At least if I need a rashie or boardies, I will still be their customer during sale time.
 
Faramir said:
Emotions has made me fall in love with this IPO. The Prospectus is filled with lots of pretty pics of surfer girls. Realising that I can't get my head around their numbers, not knowing whether it is great or not great - that tells me that giving this IPO a miss is fine. Maybe SurfStitch will have a massive increase on its first day of trading just like Beacon Lighting (I missed out on Beacon Lighting since it was oversubscribed.) I am holding onto my cash for now. It is only an extra $14.95 of brokerage if I want to get SurfStitch later. Something tells me maybe I won't. At least if I need a rashie or boardies, I will still be their customer during sale time.
Click to expand...

It looks pretty bad Faramir.

Its managers best guess is that it will lose $11M next year; Don't know if it's normal in the industry but its inventory is high; Its goodwill is some 30-40% of total assets - means it pay way too much for its acquisitions.

Its projecting revenue to grow 30% next year? Don't think that's likely in this economic condition around the world...

Just my opinions...
 
Agreed luutzu. Look at the numbers inside the brackets. I stopped drilling down into details after that. With those numbers I doubt if this IPO will be oversubscribed.

That is why there are lots of surfer girls in the Prospectus. Lots of pretty pics. I still like surfing clothes. I think SurfStitch is a great company (to buy from). Maybe the timing is wrong for its IPO (didn't Medibank IPO knocked the enthusisam for IPOs out.) Maybe its aquisitions is too agressive. Maybe they had no choice, they would have been a target themselves. I rather spend time reading this forum than reading the Prospectus since I made up my mind not to et involved with the IPO.
 
Not sure if anyone know a background on this but I maybe able to filled in a bit here for you
I am not an investor in this but I know the history

surfstich never made any money as far as I know and it been in business for a while now.
Billabong used to have a some interest as an online play then they went and acquire full ownership

then the slide of BBG begins, in many of BBG reports and briefing it boast surfstich revenue but it never show any
profit and yet they keep pumping more money into more inventory and expand this online business.

Apparently if you keep talking up revenue maybe people believe you it some how a good business even though it doesn't make any money ....sound like a .dot com dream again.

When BBG fall from grace and the hedgefund comes in and restructure the ownership, spins off surfstich is one way
they going to get some of their money back.

I havent read the prospectus but are they still talking about revenue grow and expand into more market
and no profit but burned cash?
 
ROE said:
then the slide of BBG begins, in many of BBG reports and briefing it boast surfstitch revenue but it never show any profit and yet they keep pumping more money into more inventory and expand this online business.
Click to expand...
That explains what happened to Billabong earlier this year. Some commentor mentioned (I can't remember when this was said but I remember hearing this on ABC Radio World Today straight after 12pm news) that kids preferred QuickSilver over Billabong. Billabong has outdated fashion sense. I thought both brands were similar. Why didn't they say Billabong paid too much for SurfStitch. Billabong was 'carrying' SurfStitch.

When BBG fall from grace and the hedgefund comes in and restructure the ownership, spins off surfstich is one way they are going to get some of their money back.
and no profit but burned cash?
Click to expand...
I guess those taking part in the IPO will takeover Billabong's previous role.

Great Customer Relations is not the same as Great Investor Relations. SurfStitch really discount so much of their stock during sale time. The common sizes are always sold out. This industry is very competitve. If SurfStitch reduces their large number of promos, the amount of discounts, etc - it may make a bit more profit but definitely less sales - less customers. With 700 brands and 30,000 products - they need a warehouse ie they need capital to hold stock.

A local surf shop would give us clubbies an extra 10% discount (on top of their sales) just for being a member of our local Surf Lifesaving club. This is why I sometimes buy from this particular shop due to personal customer service and they know that I am a clubbie plus a wanna-be surfie. Think of the hundreds of family owned businesses fighting back to keep our loyality. They are doing it tough but they also add pressure to SurfStitch. They won't go down without a fight. (Additional pressure involves big stores like Aldi, Big W, etc, deciding to sell CRAP to the uninformwed masses for their summer promotions.)

As usual, ROE, you are a genius and I am very grateful for your contributions. Thank you for shining a light on my comments and it only confirms my decision to give this IPO a miss.
 
I am still interested in SurfStitch.
Floated at $1, now $1.610. Thought to myself that I missed out again. Then I read this:

http://www.asx.com.au/asxpdf/20150225/pdf/42wvd0rwz6g53h.pdf

Yes, another loss: ($5,332,000)

Another sad truth, my surfing skills needs to improve dramatically, just like my naive investing skills. Glad I never got involved in this float. Might look at SurfStitch again in six or so months time. I will buying something from SurfStitch soon (but definitely not stocks.)
 
In hindsight, SRF would have been a great trade. Immediately after the float, it fell to $0.90. Slowly climbed and went sideways. Only last few weeks that it climbed up quickly but I'm not skilled enough to read these situations.
 
Faramir said:
In hindsight, SRF would have been a great trade. Immediately after the float, it fell to $0.90. Slowly climbed and went sideways. Only last few weeks that it climbed up quickly but I'm not skilled enough to read these situations.
Click to expand...

how are you feeling about this stock now? i'm in the same boat as you, i love surfstitch and mostly buy from their outlet....still, there has never been any other online store that i buy from so consistently, they have my loyalty. my housemates are also super keen on them and use them regularly. i've never discussed buying the stock with them because it's my own market research.... did you see they raised they're guidance for the next quarter? i like you are keeping a very close eye on this stock.....
http://www.smh.com.au/business/markets/quotes/announcement/SRF/surfstitch-group-limited/1619306
 
This company has been a disaster. Up there with TPW (although in that case the writing was pretty much on the wall from day 1). Just a month ago they downgraded EBITDA, and it looks as though it's happening again. Not to mention the pretty awful corporate governance issues they're having (CEO/founder resigns then launches a takeover bid after the stock tanks). I have a pretty dim view of these pure online retailers. I just don't think they can keep eyeballs (foot traffic) in a world where prices can be compared in 5 seconds. That's why they talk up revenue: Selling something at cost can turbocharge the topline.

On a related note, the Kogan prospectus forecasts NPAT of $400k (yes k, not m) this year on revenue of ~$200m. Fear not however, FY17 is when the big bucks will start rolling in. EBITDA will rise 138% and NPAT will rise 600%. Revenue will rise at a pedestrian 19%...says the prospectus anyway. Apparently that makes it worth $140m.
 
McLovin said:
On a related note, the Kogan prospectus forecasts NPAT of $400k (yes k, not m) this year on revenue of ~$200m. Fear not however, FY17 is when the big bucks will start rolling in. EBITDA will rise 138% and NPAT will rise 600%. Revenue will rise at a pedestrian 19%...says the prospectus anyway. Apparently that makes it worth $140m.
Click to expand...
Calculations are probably off-topic to SRF, but the NPAT margin might be relevant.

400k increased by 600% is 2.4mil.

200mil revenue increased by 19% is 238m.

NPAT margin 2.4/238 = 1.01%

I think that pretty much shows why it is so hard to make a dime in these online only businesses. You need so much bloody scale. As you said it's all about eye balls, which makes it hard because everyone else wants them too.

I remember reading that the online electronics market in Australia is about $2bil this year (not sure where this was from), but that means they've already got over 10%. I bet some of it isn't addressable to them either.

Is there really much operating leverage in these kinds of businesses? I can't see it.
 
Ves said:
I think that pretty much shows why it is so hard to make a dime in these online only businesses. You need so much bloody scale.
Click to expand...

What your selling comes into it, looking at graysonline, wine and scale, there are woolies, coles and grays at #3 daylight and the cellar door at #4, and is not scale good for pretty much every business.

Bought some Merrell shoes online yesterday and noticed that RCG was at the other end of the sale, suprised because i don't follow them and didn't know that they are the AU distributor for Merrell, with wine, shoes and clothing the brand and the availability of that brand plays a big part in the potential profitability.
 
Ves said:
Calculations are probably off-topic to SRF, but the NPAT margin might be relevant.

400k increased by 600% is 2.4mil.

200mil revenue increased by 19% is 238m.

NPAT margin 2.4/238 = 1.01%
Click to expand...

Yeah absolutely. Gross margin is 14.5% (compare JBH 21.7%). That doesn't leave much for anything. This biz is all about price. They can chirp on about algorithms, scale, lunar cycles, but no one is using Kogan if they're not bottom of the barrel cheap. And I don't think they'll ever get the scale of say Amazon (or even Costco) where they can run a successful uber low margin business, at least not in Australia. I've heard anecdotally that they're going to have a hard time with Dick Smith suppliers because they intend to only sell online.



Ves said:
I remember reading that the online electronics market in Australia is about $2bil this year (not sure where this was from), but that means they've already got over 10%. I bet some of it isn't addressable to them either.

Is there really much operating leverage in these kinds of businesses? I can't see it.
Click to expand...

And that 10% they've gotten was the easy 10%. Kogan is a smart bloke. If he didn't need to sell why would he? He's taken 10% of the market with no outside capital. So what's changed? If you ask me, the market is getting a lot more saturated than it was 5 or so years ago. That was easy runs. Whose in the better position JBH that can accept lower margins on online sales because of its b&m margins or Kogan that only has online and has to budget based on its 15% gpm.
 

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