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!!

Down another 10% today. Isuspect MM shorting still??

freefall, novelty over??? hope not, this share thing is so frustrating, rich one minute, skint the next.

kivver, your lucky to be rich for one minute with this one !!

last time to buy , shorters out the way , agm soon, also a 3%big buy, but you dont spend that sort of money without doing your homework.

Mail

M&C SAATCHI (overweight - Lehman) - ASOS (what does mystery investor David Harold have on AIM tiddler ASOS)


Does anyone know anything about this comment in the mail?

yesterdays buying also mentioned in the times today

Patsym
See R.N.S. 19/8/04 1101am under ASC for confirmation

BOUGHT INTO ASOS AT 60.5P, SO AM WONDERING WITH LAST NIGHTS GIG BUY AND DIRECTOR BUYING IF THERE MIGHT BE SOMETHING IN THE PIPELINE TO COME? ANYONE GOT ANY VIEWS!!!!!!!!

i thought they were due to give a trading update in Sept + i believe they also have there AGM. Other than that, the fact that their sales are growing like crazy and they are being forecast for a 1.00 share price inside next few months. Not much else going on!!!

When the Finance Director resigns the standard rule for the investor is to look out for trouble! However in this case it looks to be a smooth changeover, with a 2 month handover. The RNS message goes onto suggest the FD has resigned to spend more time with his family. If he lives in Wiltshire and travels into London every day, and has to put in the hours expected by the beancounters in a thriving company, I suspect the journey times at the end of a long day are a real problem. So this changeover does not look a worry, and the Market Makers/Companies Broker seems happy as well. The new FD is reported to have good retailing expertise so all should be fine as ASOS go from strength to strength. We will have to see what the subsequent press comments are though to be sure. Presumably the upcoming AGM will be the time and place to make the new introductions and to dispel any uncertainities.

Does anyone have any other views on this, and is the exercise of the Option likely to be a problem?

johngtudor

Discussion with a broker today who suggested that the slight easing of the price was due to the dilution caused by the granting of options.

Its pretty clear why the FD, John Morgan, has resigned. He has options for 600K shares at 3.5p, 250K at 4.5p and 133K at 10.25p. In other words, he has made his fortune, so why should he travel or even work? Morgan must have played a very significant role in the success of ASOS so he deserves a slap on the back. The transfer of responsibilites is clearly being well handled. I can't see any cloud on the horizon. The earlier concern that they might not withstand competition from the high street retailers, switching to the internet, seems of little concern given that they clearly have captured a key section of the market. Buy now or regret it as there is likely to be positve newsflow during September.

Eric

eric well said,not only sept for positive newsflow,the rest of the year should be there best ever in the run up to xmas.cheers woodie

EWRobson

Thanks for the feedback. Much appreciated. I too think September will be a good month for ASOS.

Good morning all. I am a lot happier now , the new FD does seem to be switched on as regards his retail experience lets hope he does as good a job as the outgoing man. Looking forward to the AGM. I think the key is the dates on which the options can be exercised???

SEADOG
The application for listing for 607,914 clearly refers to John Morgan's first tranche of options which is listed in the Annual Report (impressive document - I liked the birds!). Its not a big deal, except for him, as the volume is pretty typical of a day's trading (several times higher in July and I suspect later this month). His other options (the lesser amounts) can be exercised from 1/05 and 2/06. Lord Ali's options are for nearly 1.6m shares at 12.66p, exercisable at any time. Still not particularly significant. ASC's cash generation is so significant with a cash balance at the year end of 1M+ it seems unlikely that they will need to raise any more capital. It would be hardly worth it for the new warehouse project, given that the directors won't want their holdings diluted either. Morgan's comment is "..we are confident that we will continue to generate cash from operating activities due to increasing profitability and the increased strength of our balance sheet leading to improved credit terms from our suppliers." (music to the ears!). I can't see them wanting any diversification, except for addition of product lines. Its hard to imagine a more positive scenario.
Eric

You paint a very optomistic and positive scenario indeed. Then why have there been so many sellers around in the last few days. Are there any whispers about the last few months trading ?

Rake
It will be interesting if your questions flush out anything adverse because I haven't seen it. All the pointers seem to be going the other way. In fact, the price has been fairly steady this last week with a reasonable match between buyers and sellers (remember a lot of poeple are sitting on substantial profits).

Earlier this year they were happy to claim 5th place in the Hitwise top 10 fashion internet retailers; in June (Annual Report) they were second:
Next 8.17%
ASOS 3.66%
Additions Direct 3.08%
La Redoute 2.81%
then come Boden, Topshop, Figleaves, M and M Sports, Mothercare and River Island. ASOS are increasing market share in a market growing at a predicted 54% (on line shopping overall) this year.
I have just received an analysis from Hoodless Brennan & partners who have been contacting ASOS shareholders, proud of the fact that they recommended ASOS at 4p. It strikes me as a balanced analysis. Amongst bull points they include "strong marketing and unique range of celebrity inspired clothing; recruitment of experienced buyers/introduction of new prodict lines; improving inventory and stock control". Bear points are "highly competetive market with low barriers to entry; threat of more aggressive e-initiatives from the high street majors; demanding forward PE of 40x; valuation assumes continued high growth for several years; susceptible to downturn in consumer confidence". They note that ASOS now stands (at 60.25p) at a premium to the market with a price to sales ratio of 5.3x compared to 1.6x at Next and 3.6x at Amazon (though bearing in mind that Next is much more mature and does not ahve the growth potential of ASOS), "There is considerable interest & momentum in the stock, but the firm must prove that it can continue to deliver sales and profit growth into the long term, whilst keeping operating costs/stock levels in check". They refer to the house broker's (Seymour Pearce) forecast for the current year to march 2005 is 1.3m. "This looks achievable on current progress but places them on a fwd PE of 40x. To justify the current valuation there can be no slip up in the 47% EPS growth forecast from 05 to 06 which could be impeded by competitive pressure or an economic downturn." They conclude with a HOLD recommendation; the fact that they are writing to clients who will have bought earlier may be the reason for not recommending a BUY. However, the whole note says HOLD.

It might help to give my personal attitude to the share which I believe is realistic. I boght at prices from 23p to 32p and took a profit on quarter of the holding at around 45p after the results. I then watched the price rise again in Lat July to around 70p in response to their trading statement (I think also investment briefings) before receding back to around 40p where I switched back in on the view that the profit taking was overdone and the larger investors were on holiday. My main point is that the cap. is still opnly 40M which means many larger investors do not yet have a stake. Couple this with the broker forecast of 1 and the highly likely positive news flow starting this month and probably going through to Xmas and you have a strong reason for buying (I have a gut feel the sales projections are under-stated). I would buy more if I had the money. Having said that, it is not a share to lock away; you need to keep a look-out for any negative symptoms/ adverse comment. I will sell progressively as the price rises but, as I did last month, prepared to switch back to buying if I have under-estimated the performance. I would rate the downside risk as 'quite low'.
Hope this helps (do challenge me on anything)and good luck, Eric

Eric

Well done that man, a very thorough and interesting dialog and analysis of ASOS. You have certainly done your homework, I only wish I could read a report like you. (I though the birds a bit on the sultry side myself)

EWRobson


Thank you for an excellent analysis with which I broadly agree. In particular your response to recent share price movements. As you say the buyers have on the whole matched the sellers recently, accounting for some consolidation of the share price at current levels. The charts are still positive with both the RSI and MACD in the right frame. My only niggle is the recent resignation of the FD, although we have agreed everything seems to be OK, why did John Morgan recently purchase shares at 57.5p and then a month or so later...resign and exercise his option. We have set out the reasons, which sound sensible, but without any inside knowledge we will only know for sure at the AGM. As to his other share options the company has not yet commented on whether they remain in force, it all depends on the terms and conditions in force both at the time of the grant and now that he is leaving. We will have to wait and see on that one. However I do understand that the site is rising in popularity amongst men as well as women, insofar as it is a good place to find Xmas presents for mothers/sisters/girlfriends etc. The potential is enormous with the right controls in place, which it seems they have. So lets hang on for the ride. Do you all agree or are we missing something? JT

EW Robson

Thanks for the info from the Hoodless note. In terms of valuation they are right to say that the forward PE looks demanding based on Seymour Pierce's current estimate of 1.36m PBT for the year to 31st March 04. What I would point out is that this estimate is, by the broker's own admission, conservative. ASOS delivered sales growth of 83% for Q1 (April - June 04) vs SP's forecast for the year of, I think, 45%. While comparisons will get progressively tougher following last years strong growth, the most recent evidence is that growth has accelerated if anything (average monthly sales, registered users, average basket etc). Q2 saw a number of important marketing iniatives such as the placement of inlay cards in every Girls Aloud CD single, and every single CD WOW product delivered to the UK mainland. ASOS also is one of only 6 merchants selected by HSBC as part of their student current account offer. A couple of days ago the ASOS affiliate manager announced partnerships with US and European affiliates as part of their "soft" launch into new territories. Given that the ASOS affiliate program was recently voted No.1 by UK affiliates and accounts for 25-30% of the company's sales, this is good news.

Most importantly, the trading statement on September 15th should include details of a major new plank of the group's strategy which should help it further differentiate its offering and further improve margins - ASOS are set to launch their own clothing line of "as seen on" products. By sourcing direct rather than from London's wholesale markets, and with the buying scale they now have, ASOS are in a strong position to become the destination for celebrity inspired fashion.

I would also say that comparing valuation ratios with mature high street retailers is an innapropriate tool. ASOS is largely immune from many of the buying/seasonal risks faced by high street ranges (because they can change their ranges almost immediately if they are not selling). The threat of a slow down in consumer confidence caused by rising interest rates and a slowdown in the housing market is also likely to affect ASOS much less than the high street because of the demographic of its core customer base - teenage girls.

BH