JMIA - Jumia

[cameronfen]

This SA article (https://seekingalpha.com/article/4264359-jumia-reporting-discrepancies-explainable-rocket-internet-reports) basically explains that the difference in buyers (2.1m to 2.7m) is a difference in definition.  Looking at Rocket Internet's annual report, the 2.1m is basically (on RI its 2.2m) sellers net of returns and cancelations etc. and the 2.7m number is gross of cancelations.  With that, everything in the Left report (with the exception of valuation) is a gross mischaractizarion of the company that should have been easily corrected by his team if they were being impartial.  However, this did expose that the management team is somewhat too promotional for me to hold as a large position (but again I should have known), and so tell me to buy (and research) Mecadolibre instead if I get the itch. 

[writser]

Tangential, but I spent a couple of minutes looking at Rocket Internet after a recent article in the Economist. Insider ownership, Debt-free, market cap of 3.6b, 3.1b cash, 500m in listed securities, 300m in loans and a portfolio of private companies valued at 1.2b. Actually seems quite cheap and surprisingly frugal at first glance.

 

All this has left Rocket with €3.1bn in cash, little debt—and a problem. It invests small sums early, and brings in more outside capital later. Running down its cash pile at the current pace could take decades. Oliver Samwer, Rocket’s boss, wants to spend more on its startups’ later funding rounds. But its current crop of firms—in “property tech” and business-to-business marketplaces—looks years away from scale.

 

Rocket could use the cash to take itself private. Being public has not created value for shareholders. It has enough ammunition: even if it paid a 25% premium to buy out other investors, it would have €1bn in cash left over, says Sarah Simon of Berenberg, a German bank. That would be some re-entry.

[cameronfen]

Tangential, but I spent a couple of minutes looking at Rocket Internet after a recent article in the Economist. Insider ownership, Debt-free, market cap of 3.6b, 3.1b cash, 500m in listed securities, 300m in loans and a portfolio of private companies valued at 1.2b. Actually seems quite cheap and surprisingly frugal at first glance.

 

All this has left Rocket with €3.1bn in cash, little debt—and a problem. It invests small sums early, and brings in more outside capital later. Running down its cash pile at the current pace could take decades. Oliver Samwer, Rocket’s boss, wants to spend more on its startups’ later funding rounds. But its current crop of firms—in “property tech” and business-to-business marketplaces—looks years away from scale.

 

Rocket could use the cash to take itself private. Being public has not created value for shareholders. It has enough ammunition: even if it paid a 25% premium to buy out other investors, it would have €1bn in cash left over, says Sarah Simon of Berenberg, a German bank. That would be some re-entry.

 

Not saying this isn't cheap but one reason is they have a bad reputation.  See here for a short write up and links: https://valueandopportunity.com/2018/11/09/how-to-invest-into-venture-capital-listed-vehicles-part-1/

[writser]

Rocket Internet rumoured to go private (link) according to a German magazine. Shares up ~8% today. Hard to judge how reliable that source is and, if the rumors are correct, whether the Samwer brothers will pay a fair price. As pointed out above they have a bit of a dubious reputation. Still, it seems like a win/win for them to take it private at a ~4.xb valuation or a low E30's shareprice if they have some faith in the valuation of the private portfolio.

 

No position, but interesting situation.

[deepdiving]

Interesting business. Macro wise - its INEVITABLE there will be an African MELI/EBAY/AMAZON. NO QUESTION about it. IT is, however, VERY early days and it will be an expensive road ahead establishing a leading network effect market there (esp. with all those jurisdictions, simultaneously, with people to back behind the mobile/online curve).

 

The good news, there will be many opportunities to pick a position later.

 

meanwhile - its better to check out SE for South East Asia leader, much closer to lead inflection point.

[cameronfen]

Interesting business. Macro wise - its INEVITABLE there will be an African MELI/EBAY/AMAZON. NO QUESTION about it. IT is, however, VERY early days and it will be an expensive road ahead establishing a leading network effect market there (esp. with all those jurisdictions, simultaneously, with people to back behind the mobile/online curve).

 

The good news, there will be many opportunities to pick a position later.

 

meanwhile - its better to check out SE for South East Asia leader, much closer to lead inflection point.

 

I was long SE before too, the problem with SE is that they are in a battle with lazada for dominance in south east asia.  Its unclear who will win (as of probably six months ago when I was long).  Sea is backed by Tencent, Lazada by Alibaba.  They are throwing so much money at the problem, SE is not even gross margin profitable.  Sea also has a much bigger market cap than Jumia depsite a much worse competitive position.  Sea is growing much faster than Jmia though. 

[writser]

Jumia up ~25% yesterday. Am still absolutely not interested :) .

 

Rocket Internet still seems somewhat compelling to me. The bought back 1.75m shares in December on-exchange and dissolved a cross-holding with United Internet AG, simplifying the balance sheet and buying back cheap shares. Both operations combined cost ~E120m, so if we adjust Q3 then there's still ~E2500m cash remaining with ~136m shares, or E18.50 / share? On top of that a private portfolio valued at E1200m, E300m in loans and a public portfolio worth E300m (roughly adjusted for the sale of United Internet, didn't bother to look in more detail so far). I.e. you buy investments worth E13 / share for E4? Seems nice. I wouldn't be surprised if Oliver Samwer tries to take the company private at some point. Still sucking my thumb. Any thoughts?

 

Sorry for hijacking this thread again. I should maybe open a separate thread but I feel my d.d. is not up to par yet.