MyDeal.com.au (MYD) - Higher Advertising Spend Driving Growth

MyDeal.com.au (MYD:ASX) was founded in 2011 and has established an online marketplace specialising in household goods such as furniture and homewares. MYD effectively acts as an intermediary, facilitating transactions between consumers and sellers (brand owners). The business now has 930 active sellers with over 6m SKUs on the marketplace. The group listed on the ASX in October 2020, raising $40m at an issue price of $1.00/share, with $5m representing founder selling and the remainder earmarked for additional advertising, inventory and personnel. The inventory investment is targeted for the group’s own private label offering with the aim of achieving sales at a higher gross margin (read ~35%-40%) against the Fy20 marketplace “take rate” of 16.3%. This is a change to the original business model which is based on being capital light as the sellers warehouse the stock and are responsible for delivery of the stock to the end consumers. The first half result delivered revenue growth of 248%, gross profit growth of 210% but a decline in underlying EBITDA to a loss of $1.0m as advertising costs increased significantly. The first private label sales were recorded, contributing $4.3m to sales at margins of 43%, while gross sales in January continued strong, rising +190% YoY.