Vaibhav Global : Back from the dead


(Mute Spectator.) #255

Secondly -
I came across this article by Prof Sanjay Bakshi
https://dl.dropboxusercontent.com/u/28494399/bfbv_2014_2015/Teaching%20Notes/Teaching%20Note-%2062-Bagger%20and%20Counting.pdf

I was thinking about the Moat (low price) and i believe its very badly misused throughout by investing community.

Low price is moat depends on product you are carting to the society,Price has never been the single criteria for the customers. Like Apple moat is Quality they place their product at premium (way above competition) still enjoys the highest market share in phones, i don’t think cheap Chinese manufactures have any moat at all as we keep seeing new and new brands coming in that segment but i have not seen any brand apart from Samsung trying to complete with Apple.

Moreover if you see low cost moat companies like WallMart or GIECO they don’t sacrifice with the quality WallMart selling the same brands at lower price than anybody else people know these bands and its a easy decision for them to pick up from WallMart same applies for GIECO too.

Even page industry formed its moat around the quality at adequate price they were never the cheapest underwear sellers using beautiful model selling it over the TV and they will never be.

Now come to luxury products like jewelry, Is low cost really a Moat ? I think when you are going to buy gold or stones you worry about getting cheated more than cost. Nobody understands quality of gold and stones in general. Stones i have found hardest to understand which Vaibhav Global sells.
and i would defiantly not buy looking at framed TV advertisement.
I think in both aspects Prof Sanjay Bakshi was wrong in the above report the Moat and Psychological aspects, In hindsight its easy to say but its imp to understand why ? if you have read the first chapter in the book influence (mention by Prof Sanjay Bakshi) about the Ruby you will know where i am going , In that a lady had a hard time selling Ruby stone even by doing all she could like putting it at prime location in store, giving discounts etc but when her shopkeeper mistakenly doubled the price of ruby it got sold immediately. The reason is the biases we have in our mind that says quality is always priced high and because no ordinary person has the ability to judge quality of stone they took price as a parameter to determine it.
This is way important psychological aspect in Gem selling than cheap TV trick Vaibhav Global plays (Something completely ignored by Professor in his thesis)

This plays a huge role in gems selling and i don’t think cheap gems has any moat at all in jewelry business what Vaibhav Global catering to, here the moat is like out of 4 road side " Thela wala " one manages to sell at cheapest price that no one can compete with. well that is good enough but that will not turn the fortunes of " Thela wala " bcoz customer base is very small there is no scale in that business on the other hand quality and brand can change fortunes that is what exactly happened with TITAN & Rakesh Jhunjhunwala .

If cheapness would have been moat NANO wouldn’t never been disaster for TATA MOTORS.

Thanks,
Dhruva


(mukul aggarwal) #256

(mukul aggarwal) #257

Results presentation:

Guidance for low double digit revenue growth i. FY18

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/e479c25b-6c66-4257-a91f-c90a93f6f304.pdf


(n.arvind2k) #258

Last 2 quarters have been turnaround for Vaibhav Global… Hope it outperforms in the coming quarters…


(mukul aggarwal) #259

Q1 Results out:

Results:
http://www.bseindia.com/xml-data/corpfiling/AttachLive/094a8fa6-9d06-42d9-b540-477ed98a9372.pdf

Presentation:
http://www.bseindia.com/xml-data/corpfiling/AttachLive/5eba4ae8-3de6-430c-9542-82dead12da59.pdf


(..pd..) #260

Vaibhav Global Concall details:

• Main attention was on web growth. TV should see volume growth coming back in following quarters.
• Currency impact from Q2 will be minimum.
• EBIDTA margin will continue see leverage to the bottom line.
• Started selling products to vendors like eBay, Amazon etc. No dilution on Margins on these sales, will remain the same. Not buying anything new for this, no additional cost/inventory.
• Expecting new customers from eBay, Amazon. Shipping cost is included in the product price.
• Average selling price will continue to be + or – 5%
• Q1 is seasonally lean, Q2 is good and Q3 is the best.
• No discussion on dividend yet. May be end of this year.
• Promoter shareholding 58%
• Debt is down to 97Lacs vs 6cr FY17. Net cash from next Q.
• NO new geography planned.
• Competition is growing. But we are level playing field now with much lower price comparing others. Low cost operator.
• Payment experience with Budget Pay. Provisions made around 1%. KPMG is the new editor and done extensive exercise to analyze the provisions.
• USA budget pay sales 34%, UK 43%

• Company’s credit rating for the long term bank facilities have been
upgraded by one notch up from CARE BBB+ to CAREA- which denotes adequate degree of safety
regarding timely servicing of financial obligations. The rating for the short term bank facilities have
been upgraded by one notch up from CAREA2 to CAREA2+ which denotes strong degree of safety
regarding timely servicing of financial obligations.


(Parth2013) #261

I don’t understand why they are not coming in India ?? India is the emerging e-commerce market and if they compete in us then in India I think have will be market leader if they come .

Then why they are not coming??
Expert comments please.


(mukul aggarwal) #262

Q2 results presentation:

http://www.bseindia.com/xml-data/corpfiling/AttachLive/ff4c3298-9049-4e03-8013-96661c64890d.pdf


(Yash Sejpal) #263

Q2 FY18
• Revenue INR expanded by 2%, retail revenue product increased by 11%
• Increase in gross margin due increase in retail mix
• TV viewership has been growing although with the help
• Working capital has increased due to increase inventory for holiday season
• Launched brands on its sale channel
• Serve 340,000 unique customers. Repeat buying at 19 times vs 17 times
• Retention rate at 48.4% in US and UK
• Volume growth at 5%. Increase in ASP due to change in product mix. Change in product mix due to increase in wig sales.
• Increasing sales towards web. Decrease in TV volume in H2 due to increased ASP and incentivize TV crew to divert traffic to web
• FY18 topline guidance of 15% in constant currency terms. PAT will grow faster than topline going forward


(naveen.p) #264

Hi Guys,

I am a bit suspicious about the Subsidary in the British Virgin Islands., Genoa Jewelers Ltd.

I know that not all offshore companies are bad, and they offer great tax advantages but how do we know that the business that Vaibhav is doing in the british virgin Islands is legit and not some place to Hoard and siphon cash into offshore assets?

I tried to look at the shareholding pattern.

Geona is 100% owned by Vaibhav
Geona has subsidires LFDI Secreatries Limited (Hongkond), LFDI Corporate directors limited (Hongkong), etc, and all of them are incorporated at the same time.

The Hongkong companies LFDI Directore and LFDI Securities and Geona all have been incorporated in 2004 April.

Another thing is that the out of the share of total revenue of Vaibhav for YE 2016 March (1276 CR), 91% of the revenue is from Geona (1100 Cr).

Report on Geona Financial statements from Vaibhav’s website

Geona shareholding pattern and links

How do we know if the numbers are Legit? Correct me if my suspicion is not valid.


(Chandragupta) #265

The US & UK business is routed through Genoa Jewelers BVI. Both – The Jewellery Channel UK & The Jewellery Channel US are subsidiaries of Genoa. Probably it gives the company a tax advantage, which is why such an arrangement is arrived at (my guess).

To go deeper into the group’s inter-company relationships & transactions, one needs to see the standalone statements of Genoa & its individual subsidiaries, which are not available on the website. Website only gives Genoa’s consolidated statements.

Indeed, complicated organization structures like this are a big risk factor in investing in such companies.


(naveen.p) #266

Thanks for your inputs Chandra, as you said lack of calrity on this is the only thing that is holding me back from Investing in this stock.


(KunalKothari) #267


It’s interesting that jewelry also has health & safety issues.


(bimalb) #268

Very good result by vaibhav global.

Disc - invested


(nil_71) #269

It is good to ask as many tough questions as possible but it will save some time, if questioners do some background nos crunching of previous calls at least last 4-5 qtrs on business model, B2B + B2C etc + last 4-5 years AR …

Otherwise just wastage of time…


(Yash Sejpal) #270

The company is doing well both on revenue growth and PAT terms. Balance sheet has improved also 100 Cr net cash + ROCE and ROE has increased substantially, Worth a revisit in my opinion


(..pd..) #271

Q&A
• Social media like Instagram would help create more brand awareness?
We have done. It didn’t work. Then changed the strategy.

• Proportional of sales through the APP is not that high?
We are investing in the apps. However, audience watching us for long hours on TV and Laptops. AI augmenting where customer can see the product on their own self.

• Inorganic growth, more dividend, capex plan as more cash flow?
Dividend is only visibility, no plan of capex in next 2 years, inorganic growth no plans yet.

• Market growth rate in US and UK, changes in competitive landscape?
Listed competitor reports 3-5% growth rate.

• How should one project sales and profitability in medium term?
US and UK markets are good. Our market share is 2.3% vs the listed companies which was 2% last year. Market size is big. We are the lowest product producer. Best cost structure in the industry. Confident of mid-teens growth for the next 2 years.

• Competitors took decades to reach to the size. Possible for VGL to reach there?
We want to grow at consistent pace, and not looking to be billion or trillion company.

• Employee cost grow yoy and % of revenue?
2 factors. This year we are performing ESOPs which goes in employee compensations. Cost booked from Mexico to inhouse. Call center in Mexico was in admin cost.

• What ked to this volume growth? Will it continue?
We give no guidance on volume growth. We are multi category and multiproduct company and therefore revenue growth is important. ASP 25-28 price points.

• Reason TV broadcast cost reducing so how will we reach to more customer?
Almost 2 years, we have optimized cost structure. Through negotiation, exiting non-performing location. Going forward broadcast may remain stable or go slightly up.

• Guidance of 14-16% revenue growth?
Yes

• Rupee depreciation benefit on margin expansion? Forex gain?
Yes

• ESOP cost?
4.4cr this quarter. It will continue due to application of IND AS. This is just change in accounting process comparing before Apr 2016.

• What % of revenue from Budget EMI?
Around 39% (39% in US and 37% in UK) vs (35% US and 36% UK) yoy.

• ASP up in tv and web, but gross margins lower yoy?
This quarter B2B business is higher which is lower margin. Not a core business. Guidance of 60% + gross margin.

• One subsidiary that has been formed, how will it contribute?
China, we have manufacturing process. Currently we export from Hong Kong, now this will be from China directly.

• Elaborate on welcome pack?
UK this was going on. It consists of letters from local business head unit with samples of some products like perfumes.

• Tariff war? Import duty?
We look this at opportunity. Our gross margin are very high vs competitors. It will impact them more and least to us as will be more competitive.

• Lifestyle products contribution?
Around 14%. More or less same margins however customer retention is less. Promote this form same channels, Amazon, ebay, Walmart.


(AmitContrarian) #272

looks like good time to sell the stock … earnings are cyclical highly correlated to U.S economy.


(ankush raghuvanshi) #273

Growth emerging, but working capital also increasing extensively. Gives sense that EMI option, delaying receivables propelling growth. Okayish signal


(..pd..) #274

Dec numbers should be pretty good. Holiday season for USA and UK.