Camplify Holdings: Margins expected to recover in FY23

Author name:: By Steven Sassine
Job title:: Associate Analyst
Date posted:: 15 September 2022, 7:00 AM
Sectors Covered:: Diversified Financials

Camplify’s (ASX:CHL) recently released FY22 result highlighted the strong underlying momentum in the business post lockdowns easing and the platforms resilience in a weather impacted operating environment. It was a broadly positive result with GTV growth of 63% (A$53.6m) and revenue growth of 93% (A$16.4m), implying a take rate step up to 30.5% (vs 25.7% in the pcp).
With growth seen across key business metrics, the fall in gross margin to 46% (vs 62% in FY21) was perhaps the result surprise in our view. However, we note CHL has recently implemented price rises to recoup the majority of this margin loss in FY23. Pleasingly, future bookings also appear robust at ~$14.8m (vs ~A$7m in the pcp).
We lower our revenue estimates over FY23F-FY25F by ~23-25% on additional conservatism to CHL’s international ramp up. However, we also anticipate a quicker recovery in gross margins (post the FY22 dip) on the above mentioned price rises. Our price target (DCF/Multiples blend) is lowered to (login to view). Add maintained.

FY22 result round out

CHL’s recently released FY22 result highlighted the strong underlying momentum in the business post lockdowns easing.

It was a broadly positive result from CHL, in our view, with the robust gross transaction value (GTV) growth (+63% on pcp) and step up in the take rate to 30.5% (from 25.7% in FY21) that lead to a +93% year on year increase in revenue to A$16.4m the highlights.

Whilst the 4Q22 update pre-released the majority of key headline metrics, the result surprise/negative was the decrease in gross margins from 62% in FY21 to 46% impacted by higher COGS (elevated insurance costs) and increase in van sales (lower margin product at ~9%). CHL reported a NPAT loss A$8.2m.

Other details worth noting

Whilst ‘hirer’ gross margins (GM) remained broadly stable year on year at ~82%, group GM stepped down in FY22 to 46% (from 62% in the pcp) due to elevated insurance costs around weather events. CHL has implemented price increases within its Premium Memberships/listings fees to recoup the majority of the lost margin. We understand CHL will also be focusing on the sale of its Summer Series vans in FY23 (higher margin of ~20%) which should also benefit group GM.
As a further sign of continued momentum in the business future bookings at the end of June-22 were A$14.8m (up from the ~A$7m in future bookings at the end of June-21).
CHL has improved its hirer repeat rate by 5% to 25% (hirer CAC = A$13). Improving efficiency in its acquisition channels has also seen a 21% drop in owner CAC’s to A$258 (LTV/CAC ~4.2x, MorgansE).
Ancillary products/services are expected to be additional revenue drivers into FY23, notably the Temporary Accommodation Program (insurance work, Government contracts) which CHL aims to build upon in States outside of NSW as well as NZ in the medium term.

Forecast and valuation update

We lower our revenue estimates over FY23F-FY25F by ~23-24% adopting a more conservative approach to CHL’s international expansion ramp (forecast 3 year revenue CAGR of 46%).

However, we also anticipate a recovery in gross margins in FY23 on price rises and a focus on the higher margin Summer Series van sales (MorgansE FY23 GM = 58%). Our price-target (DCF/Multiples blend) is lowered to (login to view) on the above changes. Add maintained.

Investment view

CHL’s management team has shown an ability to build out a successful scalable platform, in our view.

Whilst still in its infancy and not without risk, we believe structural tailwinds supporting CHL and the prodigious opportunity offshore should provide longer term growth potential for patient investors.

Risks

Broadly, the two biggest risks faced by CHL are business disruptions (e.g. bush fires, floods, etc) and those risks associated with being a dominant digital marketplace (e.g. platform risk and competition impacting margins).

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.