Temple & Webster (ASX: TPW) is doing a capital raising. Is it the best ecommerce ASX share?
What is Temple & Webster?
Temple & Webster describes itself as Australia’s leading online retailer of furniture and homewares. It sells over 180,000 different products from hundreds of different suppliers. Many of the products are directly shipped to customers by suppliers, which means faster delivery times and reducing the need to hold inventory. It also has a private label range which is sourced by the company from overseas suppliers.
The capital raising
The ecommerce ASX share wants to raise $40 million in a fully underwritten institutional placement.
Institutional investors will get the change to buy shares at $5.70 per share. This is a 9.7% discount to the last closing price of $6.31 at 30 June 2020.
The raised money will be used to provide the business with the financial flexibility to pursue strategic growth initiatives, investing in its digital platform and improving its product & service offering.
The acceleration of online shopping has meant Temple & Webster management wants to make sure it can take advantage of organic or inorganic growth opportunities.
Is Temple & Webster the best ecommerce ASX share?
There are a few shares that could claim to be a top ASX ecommerce share such as Kogan.com (ASX: KGN). But Temple & Webster could be one of the best ideas.
As part of the capital raising, Temple & Webster revealed that its FY20 revenue to 31 May 2020 (YTD) was up 68% to $151.7 million. YTD EBITDA (click here to learn what EBITDA means) is up 668% to $7.1 million.
June gross sales up to 28 June 2020 was up 130% compared to the prior corresponding period and FY20 EBITDA is expected to be greater than $8 million.
I think the company has a strong future. In May 2020 alone it had 3.5 million website user visits and it reached 2.4 million email subscribers. Australian consumers are not as focused on online shopping. In 2018 only 4.4% of online furniture & homeware sales were online in Australia compared to 14.8% in the UK and 14.9% in the US.
There is a significant opportunity for Temple & Webster to grow its market share of the overall sector as an online-only player.
COVID-19 has caused a lot of people to change to online shopping, which definitely benefits the company. The ‘millennial’ age bracket is reaching the key age where people spend more on their homewares and furniture. Temple & Webster could see much more activity from millennials as they enter the company’s ‘core demographic’.
At the end of May 2020 the company had $29.2 million cash with no debt. I think it’s a very promising business with a good future for the foreseeable future, I’d be happy to buy some shares when the trading halt ends.
Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.