Author Topic: JMIA - Jumia  (Read 2865 times)

Spekulatius

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Re: JMIA - Jumia
« Reply #20 on: May 13, 2019, 03:34:13 PM »
While not unique to Jumia, I wonder if we are at a point in the cycle where we see a lot of naked bodies, as the water starts to recede. Lyft and Uber come to my mind as well.
To be a realist, one has to believe in miracles.


cameronfen

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Re: JMIA - Jumia
« Reply #21 on: May 13, 2019, 06:41:27 PM »
Regarding your company specific points: really you want to look at gross profit growth not revenue growth.  Third party sales revenue is booked as a transaction fee on the sale.  First party revenue is booked as the entire sale price of the item.  So its not an apples to apples comparison.  Furthermore, as the platform matures, obviously they will shift mix towards higher roi third party sales.  The first party sales are just done because they cant find sellers in an important niche.  These are not sales a company should be making when it matures. Gross margin grew by 80+% and GMV grew by 50+%.  Suggesting the actual underlying business is growing quickly.

Right, thatís what the management says we should focus on.

Personally, in situations like this I prefer to focus on numbers that are relatively difficult to fake, like revenue and cash flows.  Iíll take another closer look at this if/when things start to look better on those fronts.

Wait but management explanation makes a lot of sense.  For third party revenue they earn 5-10% transaction fee of whats sold and most of that is gross margin.  The cost of producing the good is born by the seller and doesnt enter into revenue.  For first party revenue, they earn 100% of whats sold as revenue and 5 to 10% of it is gross margin and the rest is cost paid to the producer of the good, but 100% is booked as revenue!  If you want an accurate repersentation of their moat or growth of the company, it makes sense to look at how much goods is sold and compare company growth on either a gmv basis or a gross margin basis.  Sure it is what management is saying, but it makes perfect sense.


 There is no question they could be faking it, but the Citron report is all about faking revenue not gross margin.  Note that even in the Citron report, the one metric that was the same accross both JMIA presentations was GMV.  I'm sure revenue was the same but it was not mentioned.   I think you are right cash flows may be a good metric, unfortunately it wont work for this company for obvious reasons and is a good reason to not go long.  Granted I'm not trying to get you to buy the stock, at least conciously, but maybe I'm taking this too personally. 

SHDL

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Re: JMIA - Jumia
« Reply #22 on: May 14, 2019, 01:09:52 PM »
Wait but management explanation makes a lot of sense.  For third party revenue they earn 5-10% transaction fee of whats sold and most of that is gross margin.  The cost of producing the good is born by the seller and doesnt enter into revenue.  For first party revenue, they earn 100% of whats sold as revenue and 5 to 10% of it is gross margin and the rest is cost paid to the producer of the good, but 100% is booked as revenue!  If you want an accurate repersentation of their moat or growth of the company, it makes sense to look at how much goods is sold and compare company growth on either a gmv basis or a gross margin basis.  Sure it is what management is saying, but it makes perfect sense.

Youíre right that they have a perfectly good reason to focus on gross profit as opposed to revenue.  However weíll still need better revenue growth for this to work well as a long term investment, because gross profit cannot grow meaningfully faster than revenue over the long haul.

cameronfen

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Re: JMIA - Jumia
« Reply #23 on: May 14, 2019, 01:52:36 PM »
^Sure that makes sense.

SHDL

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Re: JMIA - Jumia
« Reply #24 on: May 16, 2019, 03:23:31 PM »
The CEO of Jumia Nigeria (!= CEO of Jumia Technologies AG, the parent company) did an interview today with CNBC Africa:

https://youtu.be/grY3u1yo9QE

I think the whole interview is worth listening to if youíre interested in this company, but the discussion starting at 17:32 was eye opening: they are providing third party marketplace services for FREE!  No wonder they are growing so fast and losing so much money at the same time.

cameronfen

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Re: JMIA - Jumia
« Reply #25 on: May 19, 2019, 11:21:06 AM »
This SA article (https://seekingalpha.com/article/4264359-jumia-reporting-discrepancies-explainable-rocket-internet-reports) basically explains that the difference in buyers (2.1m to 2.7m) is a difference in definition.  Looking at Rocket Internet's annual report, the 2.1m is basically (on RI its 2.2m) sellers net of returns and cancelations etc. and the 2.7m number is gross of cancelations.  With that, everything in the Left report (with the exception of valuation) is a gross mischaractizarion of the company that should have been easily corrected by his team if they were being impartial.  However, this did expose that the management team is somewhat too promotional for me to hold as a large position (but again I should have known), and so tell me to buy (and research) Mecadolibre instead if I get the itch.