MFB - My Food Bag

[winner69]

A ROE of about 30% in F22 is more than pretty good

That alone somewhat justifies such a high IPO valuation

[nztx]

A ROE of about 30% in F22 is more than pretty good

That alone somewhat justifies such a high IPO valuation

bet some would be wishing they were seeing the same rate of ROE on their own equity thrown at it ..

[Joshuatree]

Comparison with MMM (ASX) Marley Spoon, forward growth guidance re 25-30%, mkt cap re $780 mill. Hello Fresh guidance 23-25%

Download Document 1.53MB

[winner69]

Comparison with MMM (ASX) Marley Spoon, forward growth guidance re 25-30%, mkt cap re $780 mill. Hello Fresh guidance 23-25%

Download Document 1.53MB

Interesting ...thanks JT

[Ferg]

Further to the good work done by nztx and others, I decided to crunch some numbers.

My concerns (as others have also mentioned):
- Insiders cashing out
- Involvement of private equity
- large Intangible Assets (note some of this INCLUDES capitalised costs. Per the supplementary notes on the Companies Office website, where people costs go up partly due to less capitalised costs)
- Negative NTA
- High P/E
- Massive current liabilities versus current assets with no cash in the bank (as nztx says, what are the dividends being paid from?)
- The numbers are hard work; they being clever clogs working in millions has resulted in a myriad of rounding differences

• Is it $16m or $17m in dividends being paid out on the FY22 results? One document says $16m but 242m shares at 7c per share is $17m. This feels sloppy.
• Also of concern is they leave some marketing costs in COGS. Freebies fall into COGS when they really should be taken out and disclosed under marketing, otherwise margin reporting becomes distorted.
• Forecast cashflow statement has been prepared on a GST exclusive basis. This feels naïve.

- massive variable cost savings to be achieved to land on FY22 NPAT numbers:

1. COGS per meal to reduce 6.1% in FY22 from $66.33/meal to $62.27 (2020 was $69.90)
2. Assembly per meal to reduce 0.8% in FY22 from $14.42/meal to $14.30 (2020 was $15.20)
3. Distribution per meal to reduce 2.9% in FY22 from $11.99/meal to $11.64 (2020 was $11.52) - hard to see how reductions are achieved with a contract with NZ Post locked in for 5 years
4. Total reduction in variable costs of $4.53/meal in FY22 for a saving of $6.8m (yes you read that right) - I will believe this when I see it.

- Average Sale Price per meal dropped in FY19 and FY20. The forecast prices for FY21 and FY22 are back to where they were in 2018.
- Whilst there was a boost in volumes due to the COVID lockdown, where is the momentum into FY22 that we are seeing in other retail sectors?
- External marketing A&P costs were reduced from $5.9m in FY19 to $3.7 in FY20. This reduction exceeded the increase in reported NPAT. This is typical of private equity organisations to cut marketing spend to shore up profits, but at what long term cost to the business? Given the spend is forecast to increase $0.8m in FY21 this effect may be somewhat mitigated, when combined with publicity surrounding the float.

Some numbers if others want to pick over them:

My Food Bag	FY18	FY19	FY20	FY21	FY22	$ Change	% Change
Meals Delivered	1,200,953	1,244,187	1,250,408	1,525,765	1,503,226		-1.5%
Volume Change		3.6%	0.5%	22.0%	-1.5%
Average Price	$124.07	$123.21	$122.60	$124.20	$124.00	-$0.20	-0.2%
Price Change		-0.7%	-0.5%	1.3%	-0.2%
Revenues $m	$149.0	$153.3	$153.3	$189.5	$186.4	-$3.1	-1.6%
Cost of Sales	$83.6	$84.8	$87.4	$101.2	$93.6	-$7.6	-7.5%
Gross Margin	$65.4	$68.5	$65.9	$88.3	$92.8	$4.5	5.1%
GM %	43.9%	44.7%	43.0%	46.6%	49.8%
Assembly	$19.6	$20.3	$19.0	$22.0	$21.5	-$0.5	-2.3%
Distribution	$15.9	$15.8	$14.4	$18.3	$17.5	-$0.8	-4.4%
Marketing	$5.9	$5.9	$3.7	$4.5	$4.8	$0.3	6.7%
Overheads	$12.5	$13.8	$12.0	$14.5	$14.7	$0.2	1.4%
Adj.		-$0.8	-$0.1		$0.1
Operating EBITDA	$11.5	$13.5	$16.9	$29.0	$34.2	$5.2	17.9%
Depreciation & Amort.	$3.3	$2.3	$4.3	$5.2	$5.3	$0.1	1.9%
Interest	$1.4	$1.2	$1.3	$1.8	$1.0	-$0.8	-44.4%
Restructure				$14.6		-$14.6
NPBT	$6.8	$10.0	$11.3	$7.4	$27.9	$20.5	277.0%
Tax	$1.8	$2.8	$3.1	$6.6	$7.8	$1.2	18.2%
NPAT	$5.0	$7.2	$8.2	$0.8	$20.1	$19.3	2412.5%
				FY21	FY22
Shares (m)				242.4	242.4
Earnings per Share				$0.00	$0.08
PE Ratio @ $1.85				560.6	22.3
Normalised Ratio @ $1.85				29.1	22.3
Dividends $m					$17.0
Dividend per Share					$0.07
Yield @ $1.85 - Nett					3.8%
Yield @ $1.85 - Pre-tax (33%)					5.6%
			FY20	FY21	FY22
Equity			$58.2	$52.7	$66.4
Receivables				$1.2	$1.2
Inventory				$0.8	$1.5
Others				$0.9	$1.1
Current Assets				$2.9	$3.8
Fixed Assets				$3.2	$3.6
Intangible Assets				$85.9	$85.4
IFRS Junk				$8.8	$6.3
Non Current Assets				$97.9	$95.3
Total Assets				$100.8	$99.1
Payables				$11.1	$8.7
Deferred Revenue				$3.5	$4.0
Tax				$0.8	$4.9
Others				$1.3	$1.1
IFRS Junk				$2.9	$2.4
Current Liabilities				$19.6	$21.1
Loans				$16.2	$1.3
Provisions				$0.3	$0.3
Deferred Tax				$4.5	$4.5
IFRS Junk				$7.5	$5.5
Non Current Liabilities				$28.5	$11.6
Total Liabilities				$48.1	$32.7
				FY21	FY22
Current Assets / Current Liabilities				0.15	0.18
Debt/Equity				0.91	0.49
NTA $m				-$31.6	-$17.4
NTA/Share				-$0.13	-$0.07
Return on Equity				1.4%	38.1%
Return on Equity Adj.				26.5%	38.1%
	FY18	FY19	FY20	FY21	FY22
COGS/Meal	$69.61	$68.16	$69.90	$66.33	$62.27
Cost Change		-2.1%	2.6%	-5.1%	-6.1%
Assembly/Meal	$16.32	$16.32	$15.20	$14.42	$14.30
Cost Change		0.0%	-6.9%	-5.1%	-0.8%
Distribution/Meal	$13.24	$12.70	$11.52	$11.99	$11.64
Cost Change		-4.1%	-9.3%	4.1%	-2.9%

EDIT P.S. I forgot to mention that given the values are disclosed in millions to 1 decimal place, the actual costs per meal can vary by up to $0.05m or 3.3c per meal - with a total possible distortion of plus or minus 10c per meal in any 1 year for the cost per meal. The maximum variation will be +/-$150k so the $6.8m savings is not far off their workings.

[Beagle]

Excellent caliber of work Ferg. (A+) I really appreciate your analysis and insights.
Extremely creative forecasting by the vendors in my opinion. I wouldn't touch this with a 40 ft barge pole.

[Ferg]

Thanks Beagle. As has been said, good on the PE guys for getting in and out but this feels fully priced. I'm sure the business will be successful but I look at things from a value POV and at the moment I think I can get better returns elsewhere. I'm not interested in stagging it either given that is gambling - I would prefer to invest. I'm sure in the investment wheel somewhere, there is an indicator for crapola floats peaking at the same time the market peaks. We are not yet at peak crapola because this business looks ok but I am curious as to what else is coming. Did you like my description for the IFRS16 Leased Assets? BTW they were excluded from the NTA calculation.

Edit: I added an edit to my original post that allows for variations in the variable cost savings due to their working in millions to 1 decimal place. In fairness to the organisation, they are forecasting a reduction in direct COGS/meal by 5.1% in the current year - and if that was only for part of the year, then the full benefit should be banked in FY22 less any cost increases. It could also be via reduced waste etc. keeping in mind there are some misplaced freebies/giveaway costs sitting in COGS.

Excellent caliber of work Ferg. (A+) I really appreciate your analysis and insights.
Extremely creative forecasting by the vendors in my opinion. I wouldn't touch this with a 40 ft barge pole.

[percy]

Thanks Beagle. As has been said, good on the PE guys for getting in and out but this feels fully priced. I'm sure the business will be successful but I look at things from a value POV and at the moment I think I can get better returns elsewhere. I'm not interested in stagging it either given that is gambling - I would prefer to invest. I'm sure in the investment wheel somewhere, there is an indicator for crapola floats peaking at the same time the market peaks. We are not yet at peak crapola because this business looks ok but I am curious as to what else is upcoming. Did you like my description for the IFRS16 Leased Assets? BTW they were excluded from the NTA calculation.

Edit: I added an edit to my original post that allows for variations in the variable cost savings due to their working in millions to 1 decimal place. In fairness to the organisation, they are forecasting a reduction in direct COGS/meal by 5.1% in the current year - and if that was only for part of the year, then the full benefit should be banked in FY22 less any cost increases. It could also be via reduced waste etc. keeping in mind there are some misplaced freebies/giveaway costs sitting in COGS.

Ferg.
Thank you for sharing .
Extremely helpful.

[RupertBear]

Excellent helpful post thanks Ferg

[peat]

Gaynor didnt bag it completely in his BusinessDesk article and says it will be the hottest listing for a while
But he asked a lot of hard questions implying he sees through the listing
and say things like : The listing brings back memories of high profile IPOs in the 1980s where demand substantially exceeded supply and brokers were swamped with orders they couldn’t satisfy. This resulted in inflated expectations, irrational post-listing investment decisions and share prices that couldn’t be maintained over the longer term.


​I'd rather go hungry than eat from this bag.