Cashrewards Listing on The ASX. Would You Buy Shares in them?

Cashrewards is potentially listing on the ASX? Would you buy shares in them? Why or why not?

Also do you think it will change the Cashrewards business model for better or worse?

Article behind paywall fyi
https://www.afr.com/street-talk/retail-rewards-platform-cash...

Summary:

  • Aiming to go public before year end
  • Market Cap expected to be $120m-$150m
  • 800k customers currently; growth of 37% year on year
  • pitch is to not only focus on cashback but using data to drive sales further

Related Stores

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Comments

  • +11 votes

    For those stuck behind the Paywall:

    Retail cash-back outfit Cashrewards' run at the local bourse just got serious.

    Cashrewards new chief executive, former Quantium, Myer and Woolworths loyalty, data and e-commerce executive Bernard Wilson.

    Street Talk understands the six year-old business has tapped Ord Minnett and Moelis to underwrite and lead its initial public offering, officially kicking off its journey to the ASX boards.

    The company is expected to raise up to $30 million for the mooted listing and wants to go public before the end of the year. The offer is expected to see the business list with a market capitalisation between $120 million and $150 million.

    Potential investors would jump onto a share register which already includes the likes of Sydney-based fund manager Alium Capital, former Macquarie Investment Management executive chairman Ben Bruck’s family trust and Cashrewards founder and executive chairman Andrew Clarke.

    Cashrewards core business is an online shopping rewards platform which gives customers cash back when they purchase products with it. Its 800,000 customers can choose to shop with more than 1200 retailers including Apple, Dan Murphy's and Amazon.

    The company has seen customer numbers grow 37 per cent year-on-year even with the onset of the pandemic, as consumers have shifted to shopping online, and it recorded transactions worth $631 million in the year to June 30.

    The pitch to funds – at a roadshow in early October – is expected to not just focus on the core cash back business but also its potential as a broader fincommerce play. Cashrewards' platform guides its customers through the entire retail journey from choosing a retailer to hitting the checkout, collecting data along the way.

    The company reckons it can use this data to drive sales and embed itself further in an individual's retail experience with things like loyalty and payment tie-ups.

    In addition to the two stockbrokers, it is understood Cashrewards also has Gilbert + Tobin at hand to provide legal advice.

  • +6 votes

    Depends on valuation - price vs projected earnings (my assessment) and details of business model and industry structure and their strategy and competitive advantage (can't see any from other players like SB, that is, do they have any moat) - e.g. their July bonus offerings while great for customers are temporary until the cash runs out, just like when SB was doing it (need to remove this from any projections).

    Key risk: be careful of founders and VC pumping up earnings in short term with something unsustainable and then letting it crash like Dick Smith after it lists and they have taken their money. Also make sure it's not saddled with a lot of new debt like Skins - even profitable businesses of the past can't survive with most/all of their earnings going to service debt.

    Also timing risk - tech companies have been having a great run; however, by the time they list (if they do), it could be a bomb.

    • +5 votes

      Agree with your comments.

      Same like Uber, i dont think this type of business model is sustainable.

      Reasons:
      -low barrier of entry for other competitors
      -stiff competition with shopback
      -no customer loyalty, customers will always choose the affiliate which offers the highest discount/cashback

      My prediction is that they will never turn a profit and will keep requiring cash injections to grow and acquire new customers. Good for us consumers bad for investors.

      •  

        I also question how valuable partnership with cashrewards is for a retailer.

        Do people search cashrewards to choose a retailer? No, cashrewards has to be promoted, and the consumer sees it as a discount. It isn't really any different than a sale price.

      • +1 vote

        Many thought similar about afterpay and they're not doing too bad.

        •  

          I reckon afterpay is more of a credit provider (ie: bank). This is more of like a groupon type thing. If Honey from the US enters the Australian market as well, its gonna shrink their market share even further.

  • +2 votes

    Oh so TA has a new boss? I wonder why the change? Is Andrew still worth for them?

    Edit: To answer your question, it depends on whether they will host anymore Ozbargain birthday parties!

    •  

      Andrew is still there as chairman. Not sure if TA ever reported to Andrew. The founder can't have everyone reporting to him and needs to put in place a structure if he wants to grow the business.

      He could be running the show behind the scenes (and no doubt still very involved) with someone who looks to have more credentials on paper up front to give the market more confidence.

  • +4 votes

    Hard to comment on whether it's worth investing in it depending on what prices look like etc., and realistically it's always a bit of a gamble.

    Experiences are though that once it goes public, companies tend to get worse. Shareholders are shitty and only tend to care about short-term/medium-term profit, so choices are often made that look good financially in that period but are terrible long-term. Obviously not all companies that go on ASX end up this way, but a lot of companies have become worse for the consumer as a result.

  • +9 votes

    Will OzBargain be offered shares at a discount ?

    • +15 votes

      Price beat at Officeworks.

      •  

        I love that !

  • +9 votes

    Hope more people use them then. Don't like our money going overseas with the other mob

    • +1 vote

      agreed :)
      We should always support an aussie company first

      not to mention the privacy issues with a company that is not aus based not having to adhere to our rules

      • +2 votes

        Read up about Dick Smith before you blindly say support an aussie company first.

        1. Do you want the founders/VC owners of an aussie company to rip you off blind?
        2. The VC owners might not be aussie
        •  

          I am talking about now, not after the listing.
          If ownership structure changed i would not support them.

          • +3 votes

            @jimbobaus: Did you see the blind bit of my comment? Read up the Dick Smith saga - if you had supported them, bet you'd not be so keen now! :)

      •  

        Pretty sure these cashback sites make most of their money through selling your data more than actual commission.

        •  

          Data retention laws exist in Australia which an aus based company like CR has to follow or risk huge fines.
          SB are a Singapore based company with a registered office in Aus, this means that they are governed under Singapore law which when it comes to data retention and privacy is no where near as strict as our laws.

          • +1 vote

            @jimbobaus:

            SB are a Singapore based company with a registered office in Aus, this means that they are governed under Singapore law which when it comes to data retention and privacy

            That is incorrect. SB is a MNC with branches all over the world including one in Sydney. They operate under Australian law while they provide their services to Australian customers.
            https://connectonline.asic.gov.au/RegistrySearch/faces/landi...

            • +2 votes

              @whooah1979: Thanks for the register link which has proven my point
              The primary shareholder (you can spend $9 and see this info) is the Singapore Based and Registered Shopback company.
              They have a sales office in Australia but are controlled from Singapore and as such if there was a breach of your privacy you cant take fight the sales office, you would have to deal with the Singapore company.
              Good Luck with That!

          •  

            @jimbobaus: "data" as in your personal details ie. Email address, phone number, or data like what stuff you have been looking at, what you're likely to buy, what you have bought etc? Cause I'm talking about the latter.

    •  

      Their customer support seems to be offshored from a few of my encounters and has been very lacking which made me consider being more open to SB.

      • +1 vote

        a quick search on the forums here also indicates CR support is far superior than SB, in fact the amount of SB did not honour my cashback posts outnumber CR ones 10 to 1.. and of the 1 that is CR (TA specifically) bends over backwards for OzB users

        SB is Singapore based and as i said i will always support a local biz first.

        So you do not like offshore support?
        yet prefer to deal with a foreign owned and based company?

        • +1 vote

          Yep, CR much more reliable than SB in every way.

  • +6 votes

    Looks like they are going for a steep (IT) valuation in the back of lockdown (potentially temporary uplifts in revenue).
    Depends on if the early investors and management escrow the majority of shares and for how long.

  • +1 vote

    I remember RewardsCentral were going to offer Priority share options if is to be listed on the ASX.

    Still waiting…

  • +2 votes

    Cashrewards Listing on The ASX.

    Watch the cashbacks get reduced to keep the shareholders happy!

  • +1 vote

    Nah probably not. Sounds like rats jumping ship lol.

  • +9 votes

    I wouldn't.

    The technology that affiliates rely on is outside their control and changes by Google or Apple (or others) could destroy their business.

    • +3 votes

      This is the issue. They're totally at the mercy of any affiliate changes the big companies might bring in.

      • +1 vote

        I agree totally - their entire business model relies on programs completely outside their influence let alone control. 3-4 of the big players pull an Amazon and have no cashback for a few months and if they have high debt they are screwed.

  • +2 votes

    Will be interesting to read the IPO documents.

  •  

    Maybe if there were any share broker cashback deals.

  • +1 vote

    Valued at $120m - $150m … yowsers! What's the multiple being applied here?

    •  

      cashback multipliers

  •  

    haha sorry i am using them but no way this kind of model will success, so many variables and miss tracking etc.
    whoever buying isn't smart

    • +3 votes

      h Haha sorry, i I am using them but there's no way that this kind of model will success succeed, so many variables and miss tracking mistracking etc.

      w Whoever buying isn't smart.

      How many shares are you buying?

      •  

        Jfc who cares about spelling/grammar. It’s not an English exam paper

        •  

          It doesn't have to be perfect, but at least get the basics right. Maybe you also missed the hypocrisy I highlighted from ChiMot for judging what isn't smart while writing in an uneducated manner.

          • -2 votes

            @kahn: Intelligence is not determined by grammar/spelling in a forum post. Also, you would seem to be suggesting that people from nesb would be less intelligent based on their English skills? That’s a touch full of oneself perhaps

            • -1 vote

              @Vote for Pedro: Even Google-translated versions would be better than the piles of poop that ChiMot presents on this website on a regular basis.

              If one makes an effort to write well, speak well, dress well, etc. then not only does it convey intelligence, but also character, integrity, and respect.

              • -1 vote

                @kahn: No. It just conveys an impression of it. Take the Catholic Church as an example - well spoken, well written, well dressed - yet kiddie fiddlers.

                If that’s how you judge ‘character and integrity’ that’s your choice.

                •  

                  @Vote for Pedro: I guess mentioning church abuses is still a touchy subject for some. Unfortunately confession does not absolve these sins. Jail is what’s needed.

  • +3 votes

    I'll buy them. They have proven to be successful over these years
    Online shopping is going to boom as people have been forced to in this pandemic's due course.
    Some reasons to consider

    1) They are Australian
    2) Very customer-centric
    3) Growth has been exponential
    4) 800k Customers and 1200 retailers is a huge number
    5) The business model has a lot of potential

    And moreover, they got TA. Andrew is always active here and listening to us and our rants, good or bad. Listening to some great businessmen (on free audible books), when the owner is himself doing the work, that business will always be on rise.

    •  

      They won't be Australian once the IPO goes ahead.

    •  

      I'll buy them

      At what price, that is, valuation?

      Or just blind buying at whatever price/valuation?

    • +1 vote

      800k customers & a $120mil valuation puts the user value at $150/user.

      If they were to generate a 5% return on their $120mil value, that would mean $7.50 generating profit per user per year (after expenses).

      Unsure if that is obtainable or not. Would have to see the company revenue info to see if they are able to do this.

  •  

    It depends on their operating cost if I am to invest in it.

  •  

    If you are already in a super fund, there is no need to dabble any further

  • +2 votes

    From a user perspective, they seem very customer-centric plus the staff (and founder) there are nice people. How cool would it be if instead of cashback you could simply buy into the company? Could easily raise $30 million capital they are wanting, from banked funds still sitting in cashrewards accounts plus a clip of future transactions($631 million p.a).

    Good on them though.

    •  

      Listing on the ASX gives access to a wider variety of buyers of their shares, and potentially favorable comparison to other companies in retail or IT.

      Basically they can get a much higher price this way

  •  

    Would be pretty pointless if the shares didn't offer good returns cash backs …

  •  

    Honey in the US got bought by Paypal for $4bn USD, so $150m seems like it could be feasible. But as someone said earlier, low barriers to entry/no customer loyalty makes the industry a bit like ridesharing. I think they could carve out a niche and have a long term viable business from it, it is just hard to tell at this point.

    Or maybe Paypal could buy them too ;)

  •  

    And the tightarse gets promoted to CEO!

  • +1 vote

    Here's what i am thinking..
    - 800k customers currently, with 37% growth yoy is attractive, but doesn't mention how many of those 800k are current/active/returning customers.
    - In typical marketing spec only volume gets a mention, not revenue. While i understand the reluctance to reveal margins, EBITDA will determine what is the multiplier to that 120m valuation is. (if i was a betting man i'd say 10 -15x)
    - There is a fair bit of competition in this space now, the customer loyalty to use CR over its peers will also play a key factor. The % of returning customers in the last qtr would be a good indicator of the company's 'sticky' business.

    •  

      That my main concern : fair bit of competition in this space now

      During the pandemic it will only increase hence they are trying to get maximum value for the company now like Branson with Virgin Airlines really got the maximum value here in OZ during the float :)

    •  

      The % of returning customers in the last qtr would be a good indicator of the company's 'sticky' business

      Only if you exclude spend by CR buying the customer back like they did at the end of July.

  •  

    With so many people out of work. We will soon start seeing lots of smaller cashback companies starting up.

  •  

    Valuation seems to be ridiculously high. Not a business model I would personally invest in.

    •  

      Tell that to TSLA investors. $1400 a share and not a single cent in income.

      •  

        That atleast has some serious potential.

        •  

          Potential to do what? The only way their investors can make a profit is to sell their stake.

          • +2 votes

            @whooah1979: Potential to be a world leader in whatever they do. Future earning potential or being part of something exciting may be the reason why TSLA valuation is high. I care less about anything over valued.

  •  

    I'd buy ASX:OZB if it IPO'ed :)

  •  

    Only if offered IPO like Aussie broadband

  •  

    Wow.

    • It has 800,000 customers and 1,500 retailers using the platform
    • On listing it will give Cashrewards a $136.4 million market capitalisation
    • The company recorded revenue of $17.1 million for the 2020 financial year and $5.4 million in gross profit.

    https://www.smh.com.au/business/small-business/cashrewards-l...

    So does this mean TightArse pay day coming up? Will he/she be a multimillionaire? No need to buy cheap scraps like the rest of us.

  • +1 vote

    According to ASX Upcoming Floats & Listings:

    • Listing date: 2 December 2020
    • Issue Price: $1.73
    • Security code: CRW
    • Capital to be Raised: $65,000,000.00
    • Expected offer close date: 23 November 2020

    That's a lot of money to be raised. However comparing to Youfoodz's IPO on 8 Dec to raise $70m, I know which one ozbargainers would prefer.

  •  

    First day of trading. CRW share price on ASX.com.au

    • IPO price: $1.73
    • Open price: $2.01
    • Close price: $1.75
    •  

      That is one of the worst first-day performances in a while.

      •  

        Youfoodz did worse it seems.

    •  

      It's improved since then 😉

      •  

        Yes it gained back the first day loss + more. I wonder what were the first day traders thinking.

        •  

          In self wealth it normally asks you to select a reason if you're selling. Says 100% sold for "other reasons". Only time will tell on how well they'll go.

    •  

      Wow I had no idea they already IPO. They had no publicity.

      At least they did better than shitty Ratesetter/Plenti. Allow members to buy at $1.66 and then dump on them and $1.09 now.

      •  

        Ratesetter sort of defranchised a lot of its p2p investors when it introduced rate caps. And the name change is just a whole shift away from the p2p model when they could get cheap money from wholesale sources.

  • +1 vote

    I dont know much about shares ,but can someone please explain to me,

    CR made a loss of 3m odd in 2019
    CR made a loss of 5m odd in 2020

    so their losses have almost doubled, revenue has fallen slightly

    I think its a good business model overall
    but
    for them to increase their profits, they would have to either start reducing cashback %s and/or take a higher comission
    if they did that, people would start using them less
    I cant see retailers eg myer, dan murphys feeling the need to have them as a partner to be successful if CR started to demand higher %s comission or comission rates to the customer
    Cr also have to throw in these huge incentives, eg spend $10 get $10 back or upsized cashbacks to keep their current and new customers enticed, which I assume where their losses are coming from

    all this talk of how many customers ,they have, does each customer even those that take advantage of these incentives really bring in that much profit for them?

    •  

      IPO isn't about profits. The underwriter dress it up so that it can pump on the first day, weeks or years and hopefully be a profitable exit plan for the founder.

  •  
    Merged from Cash Rewards Stock - Potentially Good Buy in? Your Thoughts

    Cashrewards floated IPO in December now down 25%+ on IPO listing price. Lots of people in here would potentially understand the business model and value compared to the general public.

    I am not an expert trader but seems like a good opportunity in the longer term.

    https://www2.asx.com.au/markets/company/crw

    • +1 vote

      Even better with a few % cashback code…

      T-A-pump_n_dump?

      •  

        That would be poetic and just right for the OZ bargain group to gamestop Cashrewards.. I am in no way advocating that or suggesting it just to be clear DYOR and trade at your own risk

    • +3 votes

      i wouldn't be buying in now. Still over-valued

      • -1 vote

        Agree it can go down substantially from here but it is sitting at around about a fair market value after the past few days loosing 17% a Dollar cost average approach could also be wise

        • +1 vote

          Over-valued is the almost polar opposite of fair market value. It's a business whose fundamentals don't really stack up to a $130m valuation.

    • +4 votes

      i prefer to buy stocks trending up

    • +1 vote

      Reading slide 30-32 of the latest presentation, 45% increase in active members, but the revenue growth was only 10%, the operating cost (excluding IPO expenses) was more than doubled (to recruit talented ppl). Hard to say whether it will improve over the next 5 years to say if it is a good stock to invest.

      There will be need for exclusive deals which engage the current customer base I reckon

    •  

      but seems like a good opportunity in the longer term.

      What makes it seem like a good opportunity to you?

      •  

        Solid foundations and working product that gives good value back to it's customers. Also a well known brand name that can diversify over time. I like to invest in things I understand and can see the long term value in. Also early days after being listed so early adopter is both risk and reward, if they make it even a relatively small investment could bring back substantial returns in the 5-15year timeframe. Imagine buying Google at $5 or Kogan at $1.80.

        • +1 vote

          Aren't there always people on here complaint that cashbacks didn't track etc? It's literally free money, and I don't use it, as it's more hoops to jump through, and then time wasted to try to contact people about it, to get twenty cents back.

          •  

            @brendanm: I have had about $300 total CB over the past few years with little tracking issues, there sometimes issues with exclusions being in the fine print and people thinking the should get cashback but it's exempt. All in all if you just activate it and purchase it slowly builds up. The 15% combined with Groupon is quite good

  • +1 vote

    $1.29, $0.73 and $0.17 for possible DCA.

  • -1 vote
    Merged from Did Anyone Buy Shares in Cashrewards?

    I didnt because although i use CR i cant see how a $2 float was justified to should of been floated at around 40-50cents imho but just wondering if anyone did get on it and how they are feeling about it?

    They seem to 'trash' Ozbargin so i thought i'd ask…

  •  
    Merged from Good Time to Invest in Cashrewards?

    Just saw this article on the AFR. Good time to invest?

    Source -

    Its latest quarterly report appears to have really put the skids under its valuation. It shows that Cashrewards spent $2.1 million on marketing over the quarter to acquire 68,319 new members on a rough customer acquisition cost of $31.

    However, its existing 989,587 members only generated $5.9 million of cash or about $2 a month on average each over the quarter.

    The company has not disclosed how many of the 989,587 users were active over the March quarter, but disclosed just 246,105 were active out of 922,640 in H1 FY 2021.

    The significant amount of inactive members does greatly boost average monthly revenue per active user, but you still need to allow for the the fact Cashrewards has to put a lot of its revenue straight back into the pockets of consumers. In fact $9 million was paid back to consumers from $15.1 million in cash receipts over the nine months to March 31.

    One silver lining is that Cashrewards still has $33.7 million cash on hand. Investors will hope for better days ahead.

    • +7 votes

      I don't think so.

      IMHO it's worth about 25 cents per share.

    •  

      They reported loss of $14M in the past 6 months. They might need to do another capital raising within a few months which will further dillute existing investors.

      I have no problem with companies making a loss if they can justify it by impressive growth however looking at their results, I do not think they have figured out how to spend money to make more money.

    • +1 vote

      "In fact $9 million was paid back to consumers from $15.1 million in cash receipts"
      Too many $5 & $10 bonus payments?
      .

    •  

      9mil out of 15mil. This translates to for every dollar consumer gets, retailer has to pay 1.6 dollars to cashrewards.

      Does this allow healthy profit margin for the retailers? My feeling is that cashrewards exist at the expense of retailers financial well-being.

      The service adds little value to these participating businesses. People who use cashrewards are already savvy buyers, meaning their value to businesses are low.

      Can they grow their business? Assume 10mil Australians sign up to cashrewards. When this happens, participating retailers will question why they pay cashrewards, while they are already customers?

      Overall I don't believe the business model of cashrewards, as it's a race down the bottom business that adds little value. I feel the same for Afterpay.

      DYOR

      • +1 vote

        9mil out of 15mil. This translates to for every dollar consumer gets, retailer has to pay 1.6 dollars to cashrewards.

        The retailer doesn't have to pay…. The retailer chooses to pay a commission if you bring in the business.

        Based on this it appears CR keeps is around ~1/3 passing on ~2/3.

        Does this allow healthy profit margin for the retailers?

        The retailer sets the rate, so they should be ok.

        Overall I don't believe the business model of cashrewards

        I think the business model is 'ok' for a PRIVATE company, but for a stock floated on the sharemarket, then yeah nah. It will never make enough money to keep the sharemarket happy. The CR owners are doing a 'cash out' I think ;)