Mytaste Group: Comment on Q3 and the new majority owner2018-11-08 14:16
In this research note we provide our first view of the Q3’18 report from Mytaste Group and give a comment on the directed share issue to Optimizer Invest.
Positive development trend continues
Mytaste Group delivered a solid Q3 report in line with our estimates. As expected, seasonality effects adversely impacted the figures. In this quarter, Shopping was the highlight with a growth of 156%, originating both from acquisitions and organic expansion. Further international efforts within Shopello and the expanded collaboration with Expressen, are two promising growth initiatives.
Within the Food & Beverage segment, Vinklubben has been a highlight during the year. In Q3, Vinklubben was negatively affected by a changed product offering from Systembolaget. According to Mytaste Group, it has swiftly addressed the issue. Overall growth in Food & Beverage still amounted to 23% in Q3, with higher profitability than we expected.
An optimized investment
Optimizer Invest’s entry as the new majority owner caused the stock price in Mytaste Group to soar 55% yesterday. The price appreciation was accompanied by an unusually high turnover of almost SEK 10 million and the high trading volume has continued today.
As mentioned in our Q2 update, the promising fundamental development in the company has not been recognized by the stock market this year, with the stock recently trading close to our bear case. A possible explanation is that investors have been cautious to appraise the profitability and sustainability of the new business model. The sentiment shift yesterday clearly reflects increased confidence in management and its strategy in performance-based marketing.
In our Redeye Rating, we have previously brought up the lack of an institutional owner. That is, however, a criterion that is challenging to achieve for companies of smaller size. In the light of that, it’s especially impressive that Mytaste Group has attracted an active venture capital player of such high quality. That the transaction is the largest investment in the history of Optimizer Invest, is a sign of high conviction.
The directed share issue provides up to SEK 32.5 million in growth capital for Mytaste Group to further deliver on their new strategy. Several value-adding acquisitions and new verticals within e-commerce are expected. Optimizer Invest has a strong track record with 25 investments, including Catena Media and other companies that are also active in the lead generation industry. We, therefore, believe it to be a perfect fit. The network and knowledge that Optimizer Invest can provide will be vital to accelerate Mytaste Group's growth journey.
If the outstanding warrants to Optimizer Invest are fully exercised, existing shareholders will be diluted with almost 40%. The three founders of Mytaste Group have previously been the largest shareholders and their interests are thereby aligned with the rest of the shareholder base. We believe the financial muscles and expertise of Optimizer Invest will propel Mytaste Group’s turnaround and create significant shareholder value.
We will follow up with an updated research report in the coming days.
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