Reebonz Holding makes tepid Nasdaq debut

Samuel Lim, founder and chief executive officer of Reebonz Pte, poses for a photograph at the company's headquarters in Singapore, on Friday, Jan. 2016. Photographer: Nicky Loh/Bloomberg

Reebonz Holding Limited (RBZ), the entity created after the merger of Singapore’s online luxury marketplace Reebonz with Nasdaq-listed Draper Oakwood Technology Acquisition (DOTA), has made a rather ominous debut on the bourse.

Following the merger, DOTA started trading as RBZ on December 20, 2018. Soon after, in an SEC filing on December 26, 2018, RBZ disclosed that it did not meet Nasdaq’s minimum shareholders’ equity requirement of $4 million, and its ordinary shares and warrants may be subjected to potential delisting. The company has submitted its appeal and in the interim, its ordinary shares and warrants will continue to be traded.

Following the disclosure, RBZ stock closed at $2.98 on December 26, steadily falling from its pre-merger closing price of $10.18 on December 6. A previous disclosure in December that the company had entered into agreements to sell $5 million worth of shares to existing Reebonz investor Vertex Ventures and another 1 million shares to UK-based S4 Ltd did not stem the decline.

On the first trading day of 2019, the RBZ stock further dived 17.31 per cent from the opening price of $1.95 to close the trading day at $1.72. The stock fell further on 3 January by another 6.39 per cent to close at $1.61. While the stock might be impacted by the general market volatilities, it is also being heavily shorted. According to data from Marketwatch.com, about 47.08 per cent, or close to half of its 6.38 million shares on the public float, are being shorted. The average trading volume was also relatively low with only 57,630 shares being traded.

DEALSTREETASIA looked at the operational and financial performance of Reebonz to see if there was a correlation with the stock movement.


How the operating statistics measure up

 

Source: Reebonz Holding Limited


One of the keenly followed metrics for marketplaces such as RBZ is the Gross Merchandise Value (GMV) which in this case stood at S$349 million ($254 million), and the average GMV per user was S$1,526 as of 2017. In the Asia-Pacific region, North Asia represents the highest revenue contributor at 48 per cent. However, RBZ is prioritising its focus on Southeast Asia, which contributed about 33 per cent of the total revenues.

Growth in customer numbers 

 

Source: Reebonz Holding Limited


Based on the chart above, while most of the customer growth measures showed increasing trends, one metric which showed the total buyers as a proportion of registered members have fallen slightly for the past four years from 2.79 per cent (78,000 buyers divided by 2.8 million registered members) in 2013 to 2.4 per cent in 2017.


Are Reebonz’s revenues and gross margins being projected too aggressively?

 

Source: Reebonz Holding Limited


The period from 2016 to 2018 was marred by Brexit uncertainties, trade conflicts, and capital constraints, which limited some of the capabilities for the firm to grow. There are additionally some concerns about higher market volatility and the various spending restraints by households and corporates. These factors might limit the growth of many industries, including many online players.


LTV/CAC lowered but cumulative GMV fell as well

 

Source: Reebonz Holding Limited


The above chart shows Reboonz’s customer lifetime value (LTV) and customer acquisition cost (CAC) metrics where LTV is defined as the cumulative profit generated by the respective cohort by Year 5, and CAC is defined as the total acquisition costs divided by the number of first-time buyers in the specific period. According to Geckoboard.com, LTV as a proportion of CAC measures how much one needs to spend in order to acquire a customer, and the lower the ratio, the better it is.

However, the chart also indicates that GMV between the 2012 and 2013 cohort of first-time buyers fell slightly from S$46,683 for the 2012 cohort to S$43,929 for the 2013 cohort.


Transaction Details between DOTA and Reebonz

 

Source: Reebonz Holding Limited


Based on the transaction details of the combination with DOTA, the discounts being applied to the newly combined RBZ to the enterprise value-to-revenue (EV/Revenue) multiples are quite hefty at around 35 to 44 per cent. While this might indicate that RBZ is relatively undervalued, it raises a question about the magnitude of the discounts, given that GMV and revenue growth rates are still lagging behind the public-listed Sea Ltd and another locally-based peer Redmart.


Source: Reebonz Holding Limited


At the enterprise value (EV) of 2-2.8 times 2018 and 2019 estimated revenue respectively, RBZ looks significantly undervalued compared to Sea Ltd (3.5 to 5.9 times). However, the GMV and revenue growth rates of Sea Ltd and Redmart are still comparably higher than Reebonz, and the magnitude of the discounts being applied to the valuation multiples of RBZ appear a bit high.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.