The DSK went public in November 2020. I believe the Dusk is already widely known as candle business and popular among Australians. They reported FY21 results however this hasn’t affected much from more than 4 months of lockdown in NSW, and following lockdown in other states in Australia. However, I believe the company will be great after the lockdown lift because they have a strong financial position and brand. Also, international expansion will be interesting in the long term beginning with New Zealand. I believe it can expand to other Asian countries such as Japan, China and so on. Especially, Japan can be a good candidate they have a large population and they are having a bath every day at home. Other English speaking countries can be other good candidates for the expansion.
| FY17 | FY18 | FY19 | FY20 | FY21 | |
| Sales (A$M) | 64.8 | 74.4 | 86.1 | 100.8 | 148.6 |
| Online sales (A$M) | 1.5 | 3.1 | 4.5 | 8.8 | 11.2 |
| Store Network | 89 | 96 | 106 | 112 | 122 |
| Average transaction value (A$) | — | 39 | 41 | 46 | 51 |
The sales keeps growing last 5 years and online sales are also increasing constantly. They are also adding stores even during the pandemic. Also, they already committed to 7 stores in FY22. In addition to this, average transaction values increasing is a great sign. The customers are spending more money on their products. The online sales before FY21 have been not much, I would like to know how much they increased sales during lockdown time in Australia. They upgraded their web platform in August 2021, hope I can see progress on online sales during a hard time. I will do the estimation later on. It should have been great if NSW and VIC state in Australia were in not lockdown.
| FY20 | FY21 | change | |
| Revenue | 100.8 | 148.6 | 47.4% |
| Gross profit | 65.6 | 101.3 | 54.4% |
| Cost of doing business (CODB) | 50.8 | 59.9 | 18.0% |
| CODB/Sales | 50.4% | 40.3% | -20% |
| EBITDA | 14.8 | 41.4 | 179.2% |
| NPAT | 8.2 | 26.8 | 225.5% |
| EPS (cents) | 16.4 | 35.1 | 114.0% |
| dividend (cents) | — | 25.0 | — |
| shares of outstanding | 57.7m | 62.3m | 7.97% |
They only went public less than a year so here is the result last two years, which I could get from their report. Even at the beginning of the pandemic late FY20 and the whole FY21, they have improved their business very fast. One thing I like is their improvement of the cost of doing business (CODB) of sales. So they are increasing revenue and improving the CODB at the same time. So if they can continue to do this, the company can be more profitable.
For the sustainable future growth of the company, there are 4 key drivers to grow the market share, 1. Dusk Rewards, 2. OMNI-Channel, 3. Store Network, and 4. Dusk Proprietary Products.
Dusk Rewards is a loyalty membership for the company. They pay A$10 for two years membership. Currently, they have 688k members 49% growth from the end of FY20. The members are loyal to the company, the member represents 60% of sales. So we need to keep looking at the number of members. The OMNI-Channel is an online sales channel connected wisely with shopping at the shop. Expansion of store network as showing below. It could be harder now to expand more. In last 4 years, the company has opened about 10 stores a year and close 1 to 3 stores a year.
| NSW | VIC | QLD | WA | SA | ACT | NT | TAS | Total | |
| Physical store | 33 | 26 | 30 | 17 | 7 | 3 | 1 | 4 | 121 |
The Dusk is not only selling candles. They are also trying to increase high-margin consumable products, all categories are increasing the sales.
| FY20 | FY21 | change | |
| Candles | 33.8 | 49.2 | 45% |
| Diffusers and Consumables | 30.8 | 47.6 | 54% |
| Homewares | 12.7 | 16.6 | 30% |
| Mood Reeds | 11.7 | 15.4 | 32% |
| Other | 11.8 | 19.9 | 69% |
| Total | 100.8 | 148.6 | 48% |
Balance sheets look OK. The company has no debt. The current ratio is about 1.18. Maybe they want to improve here after experiencing the lockdown. On the other hand, I would like to take a look at cash flow statements to see their operating, investing, financial activities.
| A$m | FY19 | FY20 | FY21 |
| Current Assets | 40.9 | 20.1 | 37.9 |
| Current Liabilities | 35.3 | 31.4 | 32.0 |
| Current ratio | 1.16 | 0.64 | 1.18 |
Finally the estimation of FY22,
| FY20 | FY21 | FY22 est. | |
| Revenue | 100.8 | 148.6 | 110 |
| Gross profit | 65.6 | 101.3 | 75 |
| Cost of doing business (CODB) | 50.8 | 59.9 | 38.5 |
| CODB/Sales | 50.4% | 40.3% | 35% |
| EBITDA | 14.8 | 41.4 | 36.5 |
| NPAT | 8.2 | 26.8 | 23.6 |
| EPS (cents) | 16.4 | 35.1 | 37.8 |
| dividend (cents) | — | 25.0 | — |
| shares of outstanding | 57.7m | 62.3m | 62.3m |
FY22 Revenue estimation = (FY21 total sales – online)*(1-0.35+0.05) + (online sales)*1.27
FY22 Revenue estimation Revenue = (148.6-11.2)*(0.7) + (11.2)*1.27 =96.18+14.22=110.4m
Assumptions: sales = revenue, they lose 35% of store closure and restriction but offset of revenge consumption after lockdown lift and keep using the same number for online sales growth so I add 5% increase. Online sales 27% increase based on FY20-21 number, I would say, this could be higher because of lockdown.
FY22 Gross profit = FY22 Revenue*(FY21Gross Profit/FY Revenue) = 75m
FY22 EBITDA = FY22 Gross Profit (1 – FY22 improved CODB/Sales=0.35) = 36.5m
FY22 NPAT = FY22 EBITDA*(FY21 NPAT/FY21 EBITDA) =23.6m
The CODB improves further by 5%. Cost of sales/sales ratio, NPAT/EBITDA, and share of outstandings are the same. So I could estimate FY22-EPS is the same level as FY21, this is the bottom line, hope they can do better than here if they could follow the growth trajectory like before. If only the COVID-19 gives them a step back, their share price is stable this FY22 but I think they can improve in the long term after FY23 if they can stay on track.