New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>My Food Bag<br>FY21 Result&nbsp;— Delivered as Ordered</h2>
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<p><strong>OUTPERFORM</strong></p>
<p>My Food Bag's (MFB) debut result was in-line with guidance and provided no surprises, delivering normalised EBITDA of NZ$29m. More importantly, the first seven weeks of FY22 have also been in-line with expectations and MFB has reiterated its FY22 prospectus guidance (EBITDA NZ$34m). Underlying dynamics in the business are positive with MFB's customer mix shifting towards customers with higher utilisation and retention rates, and cost pressures being mitigated by better procurement and recipe flexibility. MFB has an appealing value proposition, strong customer loyalty, and is trading on a 12 month forward PE of 17x with a gross yield of 6.6%. We see current levels as attractive versus the wider market. OUTPERFORM.</p>
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<h3>Delivering to plan</h3>
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<p>MFB's FY21 result provided minimal surprises, slightly exceeding guidance while reaffirming FY22 prospectus forecasts. The key positive was slightly higher revenues driven by increased delivery volumes and average order value. This was partially offset by higher than expected marketing spend, albeit broadly in line as a percentage of revenue. Dividend guidance was also confirmed, with MFB expecting to pay an interim dividend of 3cps (full year 6.5cps).&nbsp;</p>
<p>MFB reported contribution profit of NZ$49m, up +49% on the prior year as revenue growth was compounded by margin expansion.&nbsp;MFB's&nbsp;FY21 contribution margin&nbsp;lifted +4.3 percentage points to 25.6% and tracked&nbsp;higher&nbsp;in 2H21 (28.2%), enabled by product procurement optimisation and improved contract terms. Further margin expansion is expected as new contracts are&nbsp;annualised.</p>
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<h3>Positive shift in customer mix&nbsp;</h3>
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<div id="m_6520757464723359082ini14b-2-2-2">
<p>Customer dynamics were encouraging, with the mix of total active customers shifting towards a higher weighting of retained customers (as opposed to those who are recently acquired/reactivated). One driver of improved order frequency and retention rates was the launch of its My Choice product. Bargain Box Choice has now also been launched and is expected to provide further order frequency benefits in FY22. &nbsp;</p>
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<h3>Investment thesis unchanged, OUTPERFORM</h3>
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<p>With no notable changes in the underlying environment, and MFB meeting expectations thus far, we make no changes to our earnings outlook, with our investment view unchanged from our recent initiation note, A Winning Recipe? — Initiate at OUTPERFORM, published 8 April. We remain attracted to 1) its strong cash generation, 2) demographic trends towards convenience and online product offerings, and 3) future growth opportunities available through leveraging its brand equity into adjacent markets. An update on MFB's strategic initiatives is expected at its AGM in August.&nbsp;</p>
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<div><strong>Guy Hooper</strong></div>
<div><a href="mailto:guy.hooper@forsythbarr.co.nz" target="_blank" rel="noopener">guy.hooper@forsythbarr.co.nz</a></div>
<div>+64 4 495 5255</div>
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<div><strong>Ashton Olds, CFA</strong></div>
<div><a href="mailto:ashton.olds@forsythbarr.co.nz" target="_blank" rel="noopener">ashton.olds@forsythbarr.co.nz</a></div>
<div>+64 9 368 0127</div>
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My Food Bag FY21 Result&nbsp;— Delivered as Ordered

OUTPERFORM
My Food Bag's (MFB) debut result was in-line with guidance and provided no surprises, delivering normalised EBITDA of NZ$29m. More importantly, the first seven weeks of FY22 have also been in-line with expectations and MFB has reiterated its FY22 prospectus guidance (EBITDA NZ$34m). Underlying dynamics in the business are positive with MFB's customer mix shifting towards customers with higher utilisation and retention rates, and cost pressures being mitigated by better procurement and recipe flexibility. MFB has an appealing value proposition, strong customer loyalty, and is trading on a 12 month forward PE of 17x with a gross yield of 6.6%. We see current levels as attractive versus the wider market. OUTPERFORM.


Delivering to plan


MFB's FY21 result provided minimal surprises, slightly exceeding guidance while reaffirming FY22 prospectus forecasts. The key positive was slightly higher revenues driven by increased delivery volumes and average order value. This was partially offset by higher than expected marketing spend, albeit broadly in line as a percentage of revenue. Dividend guidance was also confirmed, with MFB expecting to pay an interim dividend of 3cps (full year 6.5cps).&nbsp;
MFB reported contribution profit of NZ$49m, up +49% on the prior year as revenue growth was compounded by margin expansion.&nbsp;MFB's&nbsp;FY21 contribution margin&nbsp;lifted +4.3 percentage points to 25.6% and tracked&nbsp;higher&nbsp;in 2H21 (28.2%), enabled by product procurement optimisation and improved contract terms. Further margin expansion is expected as new contracts are&nbsp;annualised.


Positive shift in customer mix&nbsp;


Customer dynamics were encouraging, with the mix of total active customers shifting towards a higher weighting of retained customers (as opposed to those who are recently acquired/reactivated). One driver of improved order frequency and retention rates was the launch of its My Choice product. Bargain Box Choice has now also been launched and is expected to provide further order frequency benefits in FY22. &nbsp;


Investment thesis unchanged, OUTPERFORM


With no notable changes in the underlying environment, and MFB meeting expectations thus far, we make no changes to our earnings outlook, with our investment view unchanged from our recent initiation note, A Winning Recipe? — Initiate at OUTPERFORM, published 8 April. We remain attracted to 1) its strong cash generation, 2) demographic trends towards convenience and online product offerings, and 3) future growth opportunities available through leveraging its brand equity into adjacent markets. An update on MFB's strategic initiatives is expected at its AGM in August.&nbsp;



Guy Hooper
guy.hooper@forsythbarr.co.nz
+64 4 495 5255





Ashton Olds, CFA
ashton.olds@forsythbarr.co.nz
+64 9 368 0127



My Food Bag: FY21 Result — Delivered as Ordered

My Food Bag Group Ltd

My Food Bag: FY21 Result — Delivered as Ordered