Today’s trading update provides quite a bit of room for interpretation.
My previous forecast in Beast? Or like it least looked like this.
My new forecast assumes a slightly higher H2 revenue growth due to an assumed 10% price rises as well as the new customer announcements and also interpreting the wording of “significant wins” and “strong rebounds in on trade” and “positive momentum” to mean similar rises to what’s been seen before when they had 70% US growth as “significant”.
I’ve also lifted margin average to 27% as they “head towards 35% margins” on the back of improvements made at the start of H2 that are “starting to take effect”. I’m assuming 33% and 34% margin in H1 2024 and H2 2024.
What is significant is that we see a much reduced loss in H2 2023 and near break even in H1 2024 with the forward trajectory looking quite exciting going into 2025.
The £2.2m convertible gives a nice buffer, bearing in mind that I’m assuming increasing amounts of cash get sucked in to working capital so I believe EISB has over £1m of cash today, and will generate about £2m of net cash in 2024 but that this £2m gets sucked into stock and accounts receivable.
The key question here is will growth be as rapid as forecast? With the sales and marketing investment seen in 2023, and the steady stream of new customer announcements seen on EISB’s Twitter Feed, along with the INL partnership into Macau and the wider SE Asia region, there’s reason to think “significant wins” and “strong rebound” are converting into tangible commercial success. I set out the rationale for a double double during 2024 in my previous article Beast? Or like it least.
The CEO was interviewed recently and strikes me as well organised, focused and very credible who is “sticking to his knitting” and holding the line on super premium for luxury on trade. On trade is very much the focus here and working with and supporting the channel “being there for them”. Getting the packaging right, getting the product and taste right…. the “proof points”. The company you keep is key, too, says Anthony Burt. The language you use, the positioning. EISB ability to win awards and taste tests is also a key area of success. To remain “Super Premium” and not commodotise the product. It’s all about the experience EISB’s customers want to give their customers.
On a valuation basis, assuming even a steady state for 2025 (no further growth) a £2.2m adj.EBITDA in 2025 so a ~£2m net profit and applying a conservative PE of 15 puts this at a £30m valuation which is 3.75x its current market price (7.5p/share).
The question is do you wait for the full year results due 30th April 2024 to validate progress here.
This is not advice
Oak