moPlus And Live Streaming Ventures May Transform Taiwan's Retail Landscape

Key Takeaways

• Strategic investments and new developments like moshop and live streaming aim to diversify revenue, driving long-term growth and innovation.
  
• The launch of a new distribution center and customer engagement programs could improve margins and boost sales volumes.
  
• Slowed domestic consumption and increased competition in Taiwan, along with strategic investments, are impacting momo.com's revenue growth, profit margins, and market dynamics.

Catalysts

Engages in the TV and radio production, radio and TV program distribution, radio and TV commercial, video program distribution, issuing of magazine, and retailing businesses in Taiwan.

• The launch of the Southern distribution center is expected to enhance logistical efficiency, potentially reducing delivery times and operational costs, thereby improving net margins.
  
• The introduction of the moPlus membership program aims to increase customer engagement and loyalty, which could contribute to higher revenue growth through increased sales frequency and volume.
  
• Strategic investments in new business developments such as moshop, IMM, and live streaming are intended to drive long-term growth and innovation, potentially boosting future earnings by diversifying revenue streams.
  
• The evolving ad business, despite being in the early stages, presents a substantial upside potential in revenue by leveraging data for targeted marketing, similar to models seen in the U.S. and China.
  
• Continued focus on enhancing customer acquisition and retention efforts has resulted in a 10% increase in active users, indicating a potential for future revenue and earnings growth through an expanding customer base.

momo.com Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming momo.com's revenue will grow by 5.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 3.1% today to 3.0% in 3 years time.
• Analysts expect earnings to reach NT$4.0 billion (and earnings per share of NT$15.97) by about February 2028, up from NT$3.5 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.8x on those 2028 earnings, up from 25.3x today. This future PE is greater than the current PE for the TW Multiline Retail industry at 20.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.03%, as per the Simply Wall St company report.

momo.com Future Earnings Per Share Growth

Risks

• Domestic consumption in Taiwan has slowed, reflected by a modest growth in retail sales and a decline in demand for luxury goods and branded cosmetics, potentially affecting momo.com's revenue growth.
  
• Increased outbound travel has shifted consumer spending away from domestic e-commerce, impacting momo.com's revenue mix and growth prospects as seen in their slowed revenue growth and pressure on their fashion and luxury segments.
  
• The impact of Uni-President's M&A activities in Taiwan's online market could change competitive dynamics, potentially posing risks to momo.com's future market share and revenues in a more competitive landscape.
  
• Revenue recognition for momo.com's 3P business is commission-based, which has led to a slower top-line growth, affecting overall revenue and potentially impacting future earnings.
  
• Operating expenses have increased due to continued investments in new business development and marketing, which, despite stable gross margins, has led to decreased operating profit—potentially affecting net margins.

Valuation

• The analysts have a consensus price target of NT$369.25 for momo.com based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NT$405.0, and the most bearish reporting a price target of just NT$315.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NT$131.5 billion, earnings will come to NT$4.0 billion, and it would be trading on a PE ratio of 27.8x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of NT$350.0, the analyst price target of NT$369.25 is 5.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.