Booktopia struck the ASX in December 2020, after a very rocky four-year-long IPO. Despite blue-skies and excellent results, BKG’s share price has remained stagnant. What risk does Amazon play on Australia’s biggest online book retailer, and is BKG well-equipped for the future? Should I Buy Booktopia Shares?
Booktopia Share Price
Booktopia shares have traded sideways since their rocky debut in December. BKG shares have not managed to break the $3 mark, but have instead retraced -2.8%.
This has left initial investors disappointed as the S&P/ASX bull market continues to charge higher. Investors have received returns of over 29% in the last year by just holding a broad market index fund like VAS.
Booktopia’s share price has been relatively stable throughout the year with a 52-week range of $2.34-$3.06. Investors that were lucky enough to grab BKG at the trough and sell at the peak would have realized a decent gain of 30.8%.
Booktopia is currently trading around a market cap of $380 Million. To put this into perspective that is a similar market cap to Airtasker, 88E, and Wagners group.
How To Buy Booktopia Shares? In order to buy shares in Booktopia, you will need to open a brokerage account, Prophet Recommends a low-cost CHESS-sponsored brokerage platform such as Pearler.
Should I Buy Booktopia Shares About
Booktopia is Australia’s biggest online-only book retailer. The Booktopia brand started in 2004 and has sold over 35.5 million items to more than 5 million customers across Australia and New Zealand.
Booktopia Group Limited is an Australian online only book retailer. In addition to books, Booktopia Group Limited also sells eBooks, DVDs, audio books, magazines, maps, calendars, puzzles, stationery and cards.Booktopia Activities
Booktopia will continue to remain an online retailer and has chosen to stay clear from Brick-and-mortar sales, as CEO Nash proclaims “We don’t have any appetite to go into physical retail at all.”
Booktopia sold one item approximately every 4.7 seconds and shipped approximately 6.5 million items in 2020, averaging 25,000 items per business day
Their online store boasts 145,000 titles across a broad range of books.
Booktopia has expanded fast to command an 8.5% control of the Australian book market. In 2021 the entire Australian book industry is estimated at a value of $2.642 billion, with Booktopia forecasting revenues of $223.9 million. This gives BKG an 8.5% market share.
How does Booktopia ASX Produce Income?
Booktopia Group generates the majority of its revenue from the sale of books (85% of items sold). It also sells eBooks, DVDs, audiobooks, magazines, maps, calendars, puzzles, stationery, and cards.
The group’s customer base largely consists of retail consumers, with a growing number of corporate and government customers including schools, libraries, universities, and government departments.
Website: Booktopia.com (87% of Revenue)
Operating for over 16 years, the Booktopia website enjoys significant repeat customer sales. The underlying website infrastructure has been developed in-house and currently has 5.9 million products displayed on the website.
Website: Angus & Robertson (12% of Revenue)
Booktopia Group successfully acquired and integrated Angus & Robertson in August 2015. The Angus & Robertson brand is 134 years old. Angus & Robertson manages
a diverse and complex catalog, including a leading selection of Australian and
Angus & Robertson’s loyalty program has attracted over 156,000 members.
Booktopia Publishing and Distribution (1% of Revenue)
Booktopia Publishing publishes books in print and digital formats under the Booktopia Editions imprint. The titles are sold and distributed to book retailers across the region via Booktopia’s distribution division, Booktopia Publisher Services.
Booktopia Shares Dividend History
Does Booktopia Pay a Dividend? Booktopia does not currently pay a dividend, the group has no intention of paying a dividend in FY21, and instead has elected to focus on capital growth.
Booktopia ASX IPO
Booktopia successfully raised $43 Million in capital at $2.30 per share in its IPO on the 3rd of December 2020. At a $2.3 valuation, Booktopia hit the ASX with a market cap of just over $315.9 Million.
BKG’s IPO has been a long-awaited, rocky process as the group originally eyed off a float date back in 2016.
The 2016 float was set to raise $40 million, but was put aside amidst fears of Amazon’s move to Australia, being a direct competitor to Booktopia with the subsidiary The Book Depositary.
Following on from 2016, Booktopia has managed to grab sales and grow into Australia’s $2.5 Billion book industry, despite Amazon’s move to Australia.
“The fact we could prove we could succeed when Amazon had arrived made it a lot easier to get people to invest in our future, rather than a future that might be.”Booktopia CEO Tony Nash
We saw the group use about $25 million of the IPO capital to expand their range and pay down existing debts. $18.1 million was used to payout some existing shareholders, although the group’s insiders still maintain a large ownership and ‘skin in the game’.
- Quoted Securities: 137,359,299 fully paid ordinary shares
- ASX Code: BKG
- Date: Thursday, 3 December 2020
- Share Registry: Link Market Services
- Lead Manager: Morgans Corporate Limited & Shaw and Partners Limited
- Prospectus: Morgans
Should I Buy Booktopia Shares: Investor Sentiment
You may ask yourself, what do other investors think of Booktopia shares? After surveying 101 Investors about their current BKG shares sentiment: BUY-HOLD SELL, as well as their target price over the next 12-months here are the results;
The results from this survey show there seems to be no strong investor sentiment on BKG shares. So how much are BKG shares worth? Let’s get into it.
Should I Buy Booktopia Shares: Fundamentals
|Volume 4W Avg||110,236|
|NTA per Share||$0.16|
With a PE ratio of -19.58x, we can see that Booktopia has negative earnings. This is reflected by its earnings per share of -$0.142. Meaning that the total net loss attributed to each share was 14.2 cents in Booktopia’s financials.
Compared to the All Ords, Booktopia has a very attractive price/sales of 1.63x, their P/book however is very expensive at 12.5x.
BKG ASX Market Cap:
Booktopia is a Small-cap company with a total market capitalization of just over $380 Million. This places it as the 533rd largest listed ASX company by market cap. Small-cap companies are considered more volatile and risky but do have the potential for above-average growth.
BKG ASX Debt, and NTA per Share:
BKG has no debt after using a large portion of its IPO capital to pay down existing debt. Generally speaking, we like companies with low-no debt. However, paying down their debt feels like a poor use of investor capital which could have been invested into growing the company.
Their Net Tangible Assets per share is $0.16, representing around 5.75% of the current share price being backed by tangible assets.
Booktopia is Debt-free after using investor capital to paydown debts
BKG ASX Market Liquidity:
Booktopia being a small-cap company may pose some risk of market liquidity. We can see the average turnover for the company is 110,236 equating to just over $300,000 daily. This does seem on the lower side.
Should I Buy Booktopia Shares: Financials
Booktopia has smashed its IPO prospectus forecasts in the FY21 report. BKG’s record results were largely attributed to strong sales amidst the COVID-19 pandemic which spurred on a massive uptick in e-commerce sales across the board. Over the period Booktopia realized a 27% jump in total units shipped.
BKG ASX Highlights:
- Revenue up 35% to $223.9m million (FY20: $165.7 million)
- Underlying EBITDA (adjusted for IPO costs) up 125% to $13.6m (FY20: $6.0 million)
- A record 8.2 million units shipped
- Strong momentum in book industry vertical integration through Booktopia Publisher Services and Booktopia Publishing.
“Our prospectus set some very ambitious targets for our first year as a listed company and I am very happy to report we have been able to eclipse those expectations”CEO Tony Nash
BKG Shares Key Performance Indicators:
The Booktopia group has managed to grow its key performance indicators strongly year on year. We saw record results in FY21 with over 8 million units shipped and customers spending over $126 per year with the book retailer.
Booktopia’s loyal customer base has been a driving force for the business, with 72% of the group’s revenue arising from repeat customers.
|Average Order Value ($ per order)||53.88||57.81||65.08||71.07|
|Average Selling Price ($ per unit shipped)||23.79||24.73||25.80||27.29|
|Average Customer Spend ($ per customer per year)||90.12||98.54||111.43||126.85|
|Units Shipped (000s)||4,824||5,370||6,451||8,173|
BKG ASX Income Statement
We can see Booktopia has managed to grow its revenue year on year. We can see that over the last year Booktopia’s revenues shot up a massive 35%, largely attributed to the spike in online sales.
Although we see that operating expenses have also increased, the group still managed to realize their first NPAT profitable result. In FY21 the group realized a $4.7 profit.
BKG ASX Balance Sheet
Booktopia finished off FY21 with $12 million cash in hand. The group also has a decent amount in receivables and inventories for FY22.
BKG grew its total assets from 60 to 76.9 million, representing an increase of 28%.
We see a monumental change in BKG’s liabilities between 2020 and 2021. With an overall reduction of $16.6 million, or a 26% decrease. The liabilities that were paid down were Booktopia’s long and short-term borrowings. This was funded using investor’s capital from the group’s IPOs.
The Group listed on the ASX raising $43.1m of which $18.1m was used to pay down existing shareholders. The remaining $25m was used to reduce debt and increase working capital.
BKG ASX Cash Flow Statement
Should I Buy Booktopia Shares: Technicals
BKG Shares Insider Ownership and Trading
It’s good to see Booktopia has maintained a large chunk of insider ownership post IPO. We like small-cap stocks with ~30% insider ownership and history of owners buying on market. BKG has massive insider ownership of 54.8%.
Of these Tony Nash, CEO of Booktopia owns 25,536,192 BKG shares representing 18.59% of the capital. In perspective, 5.7% of the public was floated during the IPO.
We also see large ownership 15.06%, and 10.90% respectively by two propriety limited companies: Roxygal Pty Ltd, and Nashtopia Ltd. Roxygal Pty Ltd appears to be wholly owned by Booktopia Co-Founder Steve Traurig. Nashtopia Pty Ltd also appears to be wholly owned by Simon Nash, a former director of Booktopia.
It appears both Traurig and Nash have stepped down from active duties with BKG, and have opted to maintain ownership through shell companies.
|Tony Nash Enterprises Pty Ltd (A L Nash Family A/C)||25,536,192||18.59%|
|Roxygal Pty Ltd (Benten A/C)||20,691,877||15.06%|
|Nashtopia Pty Ltd (Nash Family A/C)||14,974,321||10.90%|
|National Nominees Limited||9,554,913||6.96%|
|CS Third Nominees Pty Limited (HSBC Cust Nom Au Ltd 13 A/C)||5,791,097||4.22%|
We can see large purchases of BRG by private equity groups. We also see transactions from Fiona Pak-Poy a director of BKG and Non-Executive director of Tyro, and Wayne Baskin CTO of Booktopia and co-founder of Superhero. Wayne still maintains a 3.96% stake in the group.
|31 Aug 21||Buy||$24,969||Fiona Pak-Poy|
|30 Aug 21||Buy||$27,484,706||Lennox Capital Partners|
|30 Aug 21||Buy||$10,400,357||Regal Funds Management Pty Limited|
|19 Jul 21||Sell||$79,490||Lennox Capital Partners|
|14 May 21||Sell||$1,187,181||Wayne Baskin|
|14 May 21||Sell||$4,172,818||Antony Nash|
|29 Mar 21||Buy||$4,523,925||Perennial Value Management Limited|
Should I Buy Booktopia Shares: Future Prospects
Australia’s Growing Online Retail and Book Industries
Australia’s online retail sales have grown strongly across the board amidst the COVID-19 environment. We have seen many Australian businesses adapt and respond to the strong catalyst pushing customers from brick-and-mortar to e-commerce. As an example, JB Hi-Fi saw online sales jump over 160% in 2021.
In FY2020, online book sales reached $920 million, 15% higher than the previous year. Overall Online consumer book sales have increased at a 7.5% p.a. (CAGR) since 2015. It’s not surprising that offline brick-and-mortar book sales have been shrinking at -2.1% per year over the same period.
By FY2022, online is forecast to reach $1,111 million and account for approximately 50% of consumer book sales.
The COVID catalyst is forecasted to push the online market share to new heights of 46.8% of all book sales. We can see that customers are migrating strongly, with online sales set soon overtake brick-and-mortar sales.
Booktopia is set to benefit strongly being Australia’s largest online book retailer, commanding a 15% market share over the online space.
Key domestic competitors include Australian physical and online retailers such as Dymocks, QBD Bookshop, The Nile, Berkelouws, and Readings. Booktopia has made a bold call over their competition to remain strictly online. This has so far proven to be the right move for the company which has shown massive growth and allowed them to keep costs low, and margins high.
Key competitors with global brands who may compete through Australian or internationally based operations include Amazon (including Book Depository), Apple’s iTunes and Google Play. These big players are likely to be the biggest disrupters to the online sales space. So far Booktopia has managed to withstand Amazon’s introduction into Australia.
Booktopia’s Growth Strategy
Booktopia is well equipped to continue to grow its market share through a key focus in three core areas:
- Online Retailing
- Increasing website traffic and conversion rate, Through a focus on SEO, Pay-per-Click advertising, and affiliate programs
- Continuing to expand into education and corporate sales
- Customer loyalty and subscription programs
- Leveraging customer database
- Partnerships and Megers and Acquistions
- Growth of partnerships and marketplaces
- Bolt-on opportunities
- Potential acquisitions of other synergistic companies
- Publishing and Distribution
- Continued investment in the Distribution Centre to deliver additional automation and efficiency and in doing so increasing its operating margins
- Expanding distribution and publishing services
- Continuing to invest in distribution centres
BKG ASX Partnerships and Acquisitions
Booktopia seems to have a large focus on acquisitions to push the business forward. With M&A in the works, the group’s balance sheet is not strong enough to cash flow larger opportunities.
As such, we can expect the group to raise capital to fund future expansion. Luckily, the insider’s large ownership will likely reduce shareholder dilution as we see a high probability of them selling down to fund future growth.
Through acquisitions Booktopia is looking to expand internationally into the New Zealand, UK, Europe, Asia Pacific, and North American markets.
Booktopia has secured an agreement to become the exclusive supplier and fulfillment partner for the global online education technology company Zookal. The agreement covers approximately $22 million of annual sales and 185,000 titles with the full benefit to be materialized in FY22. ASX annoucement
In July the group also entered into an agreement to secure a 25% stake in Welbeck ANZ (The standalone Australian Subsidiary of London-based published Welbeck). The deal is expected to be finalized in late September and will see Booktopia investing around $3 million into the new business. BKG will be able to cashflow this from their balance sheet.
Under the partnership, Booktopia Publisher Services will distribute Welbeck ANZ’s catalog of 250 new titles each year and a backlist of 5,000 titles directly in the ANZ market. ASX Annoucement
Should I Buy Booktopia Shares: Prophet’s Take
Booktopia is a very ambitious business that has shown a proven strategy to success from its small beginnings. Today the group is Australians largest online book retailer. They command an impressive 8.5% market share over the entire Australian book retail industry.
The group has only become profitable after realizing a profit of $4.7 million dollars in their 2021 full-year results. Due to this the group seems wildly overvalued in terms of its PE ratio. However, the business is completely debt-free and has continued to grow sales massively. In FY21 we saw BKG bring in a massive $223.9 million in revenue, this accounts for an attractive price/sales ratio of 1.63x.
Post-IPO Booktopia’s founders and insiders have maintained a whopping 54.8% stake in the group. As BKG eyes off big opportunities in the Mergers and Acquisition space to grow locally and abroad, this large ownership will come in handy. Although the group’s balance sheet is lean with only $12 million cash-on-hand, the insiders are in an excellent position to selldown to fund future expansion with little-to-no dilution to public shareholders.
Once more comes to light on Amazon’s infiltration of the Australian market Prophet may consider a position in BKG. Their growing sales and market share does seem to signify blue-skies ahead in their fight against Amazon.