Why Naked Brands Ltd Is Clearly Undervalued
Summary
- Fredericks Of Hollywood brand asset value.
- Fifty nine million in cash and low debt.
- Transition to E-commerce as a driver for low cost structure and lower operating costs.
- Multiple niche Australian brands in asset cupboard.
Not long ago it seemed that Naked Brands limited was headed for irrelevancy. Thanks to a recent rally in the stock and some strategic changes the company has some glimmers of hope. Divesting Brendon and their other physical retail assets allows for lower cost structure and cost savings moving forward.
However the biggest arguments for future shareholder value are their Fredericks of Hollywood brand and their trove of 59 Million cash to use to fuel brand expansion and customer acquisition. Naked unfortunately got caught up in the meme stock craze and no one thought about the potential as a deep value turnaround play.
Fredericks Of Hollywood for anyone unaware had 148 million in sales years ago prior to their bankruptcy. This projects to 1.48 Billion in potential sales in today's currency. The current size of the worldwide lingerie market is currently 30 billion meaning if Naked achieves a similar result with Fredericks alone they would only need to capture 5% market share hardly a huge ask.
As with any deep value turnaround play there are real risks. If Naked runs out of cash they may have to dilute shareholders again. Or become a going concern risk. However at only a shade over a dollar a share the company is priced for this. Your getting the business for free if your willing to bet on a successful turnaround.
Analyst's Disclosure: I am/we are long NAKD.
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