ASOS have dropped quite significantly in the past week for no particular reason and I view this as the perfect opportunity to invest as I can see them bouncing right back up to the 5.50p mark in the next 2-3 weeks. STRONG BUY!!

No response from the sp though which is extremely disappointing.

Eric - from my good friend Donaferentes on the other side - pretty much reflects my views:-

Talking of operating margin, I see the gross margin has fallen from 06H1 48% to 06FY 46.7% to 07H1 43.5%. I guess the increased product range hads brought lower margined goods in with it. Still 43.5% is not bad. Let's hope we can hold it there.

For 07H2 - allowing sales of 24m (to make 40m total for the year) at a gross margin of 42%(?) less overheads of 7m add interest of 50k less tax at 30%, gives net profit after tax of 2,191,000. Add this to H1 net profits of 607k, divided by fully diluted shares in issue of 76m, for a full year EPS of 3.68p, a PE of 28 and a PEG of 0.3.

For 2008 forecasts we could see the following figures:-
Turnover +33% 53.2m
Margin 42%
Overhead 16m (??)
Interest 120k
Tax 30% (will be less due to deferred tax credits and capex allowances)
Net Profit 4,525k
Shares 76.5m
EPS 5.91p
Growth 61%
SP 143p = 40% increase from today's price over the next 12 months
PE 24.3
PEG 0.4 still humble enough to qualify as a growth share a year from now
plus there should be dividends on top adding another 1%(?) return

I look forward to the January statement and 2008 revised brokers' forecasts.

Excellent 'dog'trine according to sd. Effectively, next year is seen as pe of 17 at current price; pe of 24 more likely and therefore an sp of 143p or so. Seems eminently reasonableand a nice little earner. very low risk too as they got by burning their warehouse down with only a blip on trading.

What are your views on new initiatives. The US market must be attractive and not that costly to entry. Depends how ambitious they are. A bit more risk but potentially large returns. Cash generation is good and not much in the way of demand on capital.

Eric

The US has been the grave yard of many a UK retailer - M&S and others. They just can't gear up quick enough to play the vast market low margin game required by retailers there.

On-line e-tailing may niot suffer in the same way, but even if shipping, intermediate warehousing and returns can be got right, there is the whole fashion/taste merchandising thing to get right. America is as foreign as Beijing in many respects.

I'd be just as happy to steer clear and sweat UK followed by possibly entering Europe. If a major move to expand US occurred I might welll sell.

I see your point, sd, but the ASOS formula would appear to be right down the US appetite. Also feel that culturally UK still closer to US. ASC would have none of the investment levels met by the High Street retailers. But we are agreed that a move into another market, same or parallel products, is quite likely. Having said that, it is still early doors for the internet in UK and the potential is a significant proportion of high Street fashion sales.

Eric

Ramblings from another board:-

How come Numis predicts a 15% increase in EPS from 2007 to 2008 followed by compound growth of 59% p.a. for 2 years to 2010 - shurely shome mishtake?

To increase from EPS of 3.4p in 2007 to 10p in 2010 I could see growth pattern of, say, 60% (my own favoured bet moreorless for 2008), 42.5%, 30%. Unless they see a heavy year of investment in new premises/warehousing/staff in 2008 followed by a massive step change in subsequent 2 years.

Anyway EPS of 10p after 3 years compound 43% pa growth for a PEG of 1.0 could sustain a PE of 43 = SP of 430p, more than 4 X today's value - all quite possible if management continue down the golden path they've set out on.

sd- hire american buyers in the states- follow same concept as in the uk- no reason why it would not work

good point rh, still would rather stick to UK knitting until well-profitable.

Agree robin, who would know all about rustling up business. Really need to do the market research. The main problem could be too much success bringing a hunger for cash. But I would have though the model could replicate pretty well over there with the main investments being in buyers and warehousing. Worth looking out for hints from management reports.

Eric

More than hints from the FD in an interview (where was it?) who was very clear that they have ambitions in Europe next and then US - I think in that order.

Europe I see as much better place to be over the next few years whilst we live through the US housing - i.e. consumer - downturn.

US margins are soooo tight, you need deep pockets and a big market penetration to get off the ground.

sd I bow wow to your greater dogacity! Europe it is. Advantage could be one market at a time so less exposure. Plenty of anglophiles around - and nubile young females. Go for it, I say!

Major consideration would be current dollar to pound weakness to expansion to US, I would think?

jj50 Which would make this a good time to invest in US, presumably. Not sure where sd saw that suggestion. Nor have I seen the Amazon idea followed up. I can't see that the entry cost is that great against huge potential returns. Wher would the 'as seen on' idea have greater impact?

If sales from US are intended to be greater than cost of investment over time (I think I've got this right) then a weak dollar won't help us. It's damn nearly 1.97 today - 2 by Xmas, now where have I heard that before!

Yes, EWR and SD, my thoughts were that the clothes would seem expensive to the US consumer if based on UK prices? In other words, Americans don't buy British goods when the dollar is weak.

my thoughts were that the profits would look cheap to the UK if based on US sales!

(1) Funds could be raised in the US or, alternatively, if from UK you would twice the bang per buck, if you see what I mean; (2) Buying would be done in the US or at any rate from the US and therefore not related to UK prices; (3) in early years you wouldn't be repatriating funds but rather ploughing back in. My expectation is that the 'as seen on' idea appears typically American and could take on; not easy to replicate by others as ASOS have successful business model. Not so sure about the European markets. Any quotes from management re preferences?

China, India, Australia, Japan - also interesting markets.

What this discussion shows is that ASC have the very desirable freedom to choose where they go next. That is not to say that there is not huge potential in the UK market but that they should be laying the ground work from a position of strength. I would prefer the 'existing (conceptual) products into new markets rather than additional products to different retail sectors fo the home market'.

Eric

Positive piece in Shares with a buy recommendation. Target of 120p but already well on the way there. Very positive momentum.