May be, but then its a great opportunity for long term believers of this story to enter!
2 Likes
My two cents on this company
Let’s see the company’s business model to understand a bit more detail.
- Dream Folks has created a platform where it has integrated card providers and lounge players, delivering comprehensive information to end clients – the cardholders – regarding their airport activities and lounge utilization. So the revenue is derived from card providers and corporate clients, structured as a fee per passenger utilizing the services.
- Due to its affiliations with multiple airport lounge operators across India, the card provider enjoys convenient accessibility to these lounges. Likewise, the lounge operators are inclined to partner with the company due to the substantial volume it brings to their establishments.
While this is a network effect model where they bring volume as they have access to 95% of the cardholder who utilize airport services.
But the Concern is:
- The company’s lack of pricing power becomes evident when observing recent results, both from the perspective of lounge operations and card providers.
- They provide nothing unique regarding technology as they act as mediators. Since they are the first mover in this industry, they are enjoying the market, and also the industry size is small as and when the industry becomes lucrative and grows, we will see a new player joining and disrupting the company.
The industry is experiencing growth exceeding 50% due to favorable market conditions. However, it’s important to note that this industry’s growth relies heavily on credit card providers offering incentives to encourage credit card usage. As the growth continues, there will likely be increased pressure on these players to reduce costs, considering this expense is a customer acquisition cost for card providers.
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"Dreamfolks says
Being pressurized from airport operators since last 2 years for lounge biz.
We are small players, Authority will not be supportive of us, hence have not filed any complaint"
So, Adani is pouring cement over their moat?
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“Tough times ahead for Dreamfolks—it’s a make-or-break moment. They’ll either rise as winners or get lost in the competition.”
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Any business which is stuck between a powerful buyer (airport operator) and a powerful seller (banks) will be subjected to such pressures…so I am bit surprised with Company crying about it. They should have seen it coming and should have made plans to counter it (not sure what that can be, in such cases 
). When you are a middleman, you always carry the risk that either of the parties can take away your business by backward/forward integration strategy. If not, they can surely squeeze you with the sword hanging on your head.
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Adani entered the game
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Moat is very very important. It has to be a strong niche moat. Hence investing in real tech is important
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Significant stock price fall earlier indicated something was structurally going wrong. News came few months later. I guess that’s where tecnical analysis play a role for small investors who don’t have access to insider news.
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@Niral_Maru
I got trapped in it and almost lost 60 percent of my investment. What technical tools to follow for exit ? Pls recommend.
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Fundamental tool: There was a change more than a year back which large banks (credit card issuers) made to how people can use the credit card, based on some conditions being met.
Technical tool: 12% Stop loss, That way you never lose more than 12% on a position.
10/20/50/ EMA breaks depending upon your time frame and volatility of the market.
4 Likes
Time for a look back for me.
I booked loss a couple weeks ago. Around 55% loss.
I realised I had quite a few gaps in the way I built conviction for this story.
Errors I made:
“This is close to a monopoly business, so paying a hefty premium is alright.”
“There is a good and wide moat.” Well there was none
“Dreamfolks network kept glitching multiple times but hey software can be figured out and amended quickly right?” Well didnt happen did it?
Credit and Debit card conplimentary lounge access was tightened by most banks which could directly affect their revenue. A big fat concern which I ignored too.
.
But hey! I learned a really good lesson from this.
Thank you Dreamfolks, you didnt make me money but you taught me invaluable lessons.
Cheers!
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Same happened with me, I also justified paying premium for it thinking that “its a near monopoly”, “its just a small correction anyways air traffic is going to increase, company will be ultimately benefitted from that”.
I missed that company doesn’t have control on demand side (the credit card spend limit) and also can be replaced if a bigger player decides to enter the segment or cut the middleman (like Adani Ports started doing).
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I think the biggest point here is that there never was a ‘moat’ in the first place. Whatever ‘moat’ was talked about was just a mirage, and here’s why.
Dreamfolks was never even in a position to even influence demand because most of the customers they served were not paying customers, as in, folks paying them for the services used where they could have distinguished themselves through their service. Most of the people availing their services were just credit card users availing free services. Hence Dreamfolks was always at the mercy of credit card issuers, plus at the risk of other folks such as airport operators taking away their lunch.
Discl: Never had a position.
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@Tar was one of the earliest investors to write about the lack of a moat in Dreamfolk’s business, despite the high ROE/ROCE.
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nobody wants to take a Contra bet here ?
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I raised this flag here, and was concerned about the moat, & didnt think reward was worth the risk, saved myself in this script, but everyone has his own share of learning and luck.
Saved myself here but mat have taken a g hit elsewhere in some other script.
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Almost every company listed in stock exchange has a competition. Take an example of TCS. It’s a software company with many listed competitors. Also it’s business model can also be copied. But still it created huge wealth for shareholders. Business of the company largely depends on how efficient is the management. Dreamfolks is a small cap company and investing in a small cap company is always a risky bet. Though dreamfolks is facing challenges but it’s strong aggregator model and expanding it’s business locally and internationally gives it an edge. Here in dreamfolks also I am betting more on management’s ability to grow business and rewarding shareholders. There are many credit card companies locally and internationally. It’s very difficult for a single company to do contracts with each and every airport aggregators locally and internationally. That’s where role of companies like dreamfolks come which provides all these services with single contract. Also we can not write off income this company can generate from railway lounges in coming future. Yes, it’s a risky bet, but I have a conviction. If it plays well the returns could be above normal. Rest is destiny. Fingers crossed.
3 Likes
Not Bad results considering the valuation its trading as of now.. 8.8% Y-o-Y growth in Revenue & 24% growth in Profit ..Improved argin YoY, available at ~10 PE, TT Revenue ~1400 cr with less than 700 MCAP.. Even considering all challenges the have, I dont feel we will lose any money from this CAP..FF is less than 200 cr ..
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At current price does it seem like a multibagger value stocks or do you still stay with your thesis that this stock is a wealth destroyer? For context I am looking to invest in this and the price seems to be bottomed out due to maximum negative sentiment on this stock. However promoter holding is the issue that is worrying me.