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BOTB

Analysing companies' finances and value from their financial statements using ratios and formulae
DelayedInvestor
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BOTB

#450492

Postby DelayedInvestor » October 15th, 2021, 10:15 pm

I'm looking at Best of the Best (BOTB) and trying to figure out if it's undervalued or overvalued. Best of the Best is a basically a sort of raffle for luxury cars. It used to concentrate on airports and shopping centres but over the last few years it has moved online.

Here's the last few years (amounts in 000's)



So, until last year revenue had been increasing about 15% a year on average and profit margins were about about 10% on average but profits were improving. That last year is a massive jump obviously but that's lockdown enhanced and they've issued a profit warning for next year suggesting that's not going to continue.

The market cap hit a high of around 350M around the release of the results but it's back down to around 60M now.

Let's suppose that instead of the covid jump the the revenues had increased by 15% to 23188 and assuming that Peter Lynch is right in saying that companies that grow at 15% are worth roughly 15 times EPS then the company would be worth.


If you throw in around 6M in cash it looks like 60M might be about par.

However, the profit warning doesn't actually seem to be suggesting that profits are going to be returning to pre-pandemic levels. They've suggested a 57% reduction which means that earnings would be around 5M which if we use the 15 multiplier would suggest about about 75M is a better estimate. Also, as the reduction in expected profits is due to the higher cost of getting customers through online advertising is something which they feel could normalise there's a resonable chance that profits could be higher than 5M.

Another good thing about BOTB is the high level of insider ownership. It does seem that the main shareholder/founder has just stepped down from the board though so I'll need to do a bit more digging on that.

Any thoughts or comments are very welcome.

SteMiS
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Re: BOTB

#450550

Postby SteMiS » October 16th, 2021, 10:58 am

DelayedInvestor wrote:If you throw in around 6M in cash it looks like 60M might be about par.

However, the profit warning doesn't actually seem to be suggesting that profits are going to be returning to pre-pandemic levels. They've suggested a 57% reduction which means that earnings would be around 5M which if we use the 15 multiplier would suggest about about 75M is a better estimate. Also, as the reduction in expected profits is due to the higher cost of getting customers through online advertising is something which they feel could normalise there's a resonable chance that profits could be higher than 5M.

Another good thing about BOTB is the high level of insider ownership. It does seem that the main shareholder/founder has just stepped down from the board though so I'll need to do a bit more digging on that.

Any thoughts or comments are very welcome.

I don't really have any thoughts about the numbers as I've never really been that interested. However the thing I've always wondered about BOTB (even when it was being heavily ramped by all and sundry) was why anyone would ever play it? The chances of winning are lower than the national lottery - cost of sales (which I assume is an approximation of the payout) is around 40% compared to the national lottery payout of 53%. For that you are forced to take a luxury car (which many couldn't afford to run and maintain anyway) or some other possession you might not really want. In comparison, with the national lottery, you get cold hard cash to do with what you want. With the national lottery, of the other 47%, 25% goes to good causes. Whereas all the 'other' 60% with BOTB goes to a combination of running costs and the pockets of it's shareholders.

Strikes me that BOTB was a business which managed to get it's moment in the sun, during covid, but is now doomed to a lingering death as it's 'customers' gradually realise that it isn't that attractive a proposition...

DelayedInvestor
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Re: BOTB

#451812

Postby DelayedInvestor » October 20th, 2021, 10:03 pm

Thanks SteMiS. Yeah, the odds don't represent good value for money but then that's true of any gambling company. It's definitely true that Covid gave them a boost but they were profitable before covid too. It'll be interesting to see where it goes from here.

SteMiS
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Re: BOTB

#451888

Postby SteMiS » October 21st, 2021, 9:01 am

DelayedInvestor wrote:Thanks SteMiS. Yeah, the odds don't represent good value for money but then that's true of any gambling company.

But I think with gambling companies there's an illusion of skill (apart from online roulette, which I guess provides the 'excitement' of immediacy and visual stimulation - watching the roulette wheel turn). As an experience, BOTB seems exactly the same as the National Lottery; you buy a ticket and wait for the result.

DelayedInvestor wrote:It's definitely true that Covid gave them a boost but they were profitable before covid too. It'll be interesting to see where it goes from here.

True. Prior to the 2021 EPS of 122.5p (last trading update suggested 2022 would be around 53p - 53% less) EPS was 37.5p in 2020 and 17.6p in 2019, so maybe current share price of 605p looks attractive purely on fundamentals. As I say, it's not a share that has ever really interested me.

As an aside, in the run up to the 2021 results didn't the directors try to sell the company and then place a significant (~26%) of their shareholdings to 'satisfy institutional demand' at nearly 4 x the current price ?

dealtn
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Re: BOTB

#451947

Postby dealtn » October 21st, 2021, 11:52 am

SteMiS wrote:
As an aside, in the run up to the 2021 results didn't the directors try to sell the company and then place a significant (~26%) of their shareholdings to 'satisfy institutional demand' at nearly 4 x the current price ?


They weren't alone in selling. It was a 10-bagger for me, and actions such as these generally make me uncomfortable.

It's on my list for review and potential re-investment. (I don't agree with your earlier statement of "heavily ramped by all and sundry" btw - it certainly became visible from a previously ignored small cap, which happens with "growth stocks". No doubt many - unwisely - chose not to DYOR).

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Re: BOTB

#454644

Postby Turf » October 31st, 2021, 5:14 pm

Hi There just catching up with Lemon Fool and saw your trail ref BOTB , I actually won a Porsche Boxster GTS 4 litre last September and took delivery in January. The whole experience was fantastic, but I do think their moment in the sun may have passed. By the way it is Spot the Ball and not a raffle ticket so an element of skill is involved as my Grandad would always say !!

I think the business model is actually pretty straightforward and their costs are fairly constant, I am pretty sure they will remain profitable it is whether the market will want to see double digit growth year on year, I will keep an eye on SP

Regards Pete


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