What's down with Purple Group? (#481)

Simon Shares

• Strong Nedbank (JSE code NED) trading update.
• If you held Steinhoff (JSE code: SNH) when it all went wrong in 2017 you have until 15 May to submit a claim.
• Oceana (JSE code: OCE), now the CEO quits?

* I hold ungeared positions.

Upcoming events;

• 22 April ~ Introducing the CoreShares Total World ETF
• 06 March ~ JSE Power Hour: Finding income in JSE listings

What's down with Purple Group* (JSE code: PPE), owners of EasyEquities?

After a high of 349c a month ago it's now 261c.

Firstly it's more sellers than buyers.

The hype of the pandemic trading is fading and easy returns are fading. So less trading, slower new accounts (albeit reports that they still have great new account rates).

Vacation is wild.

For the year ending August 2021

• 737k active accounts (up 45.7%).
• Each account makes R69 profit.
  • But as accounts age profits per account increase.

What can we expect to see for the year ending August 2022? (NOTE, the interim results to end February will be out early April).

• 1million accounts? That's 263k new accounts and growth of 35%.
• Profit per account R76 (10% growth, older account more profitable BUT less market volatility means less transactions).
• = R76million profit (I ignore GT247 and Emperor Asset Management)
• With 1.2billion shares in issue that's HEPS of 6.3c = forward PE of ±40x

That seems fair, but there are risks.

• The assumptions above could be wrong
• GT247 could lose money
• New projects cost money
• Dilution with new share issues
• I am only using EasyEquities, ignoring other business units.

There are of course potential upside surprises as well

• The assumptions above could be wrong
• Growth is better
• GT247 makes money and EasyProperties kicks in strongly

I sold 35% of my holding at 315c-345c on the way up, this was because it simply became too large within my portfolio (was the biggest holding after buying at 50c less than 2 years ago). But I am happy to continue holding.