bikeexchange ltd (bex)

Shaw and Partners

0.2000 00000 000

BEX – Equity Report current as at –03/08/2021–Pg. 1

Bikeexchange Ltd (BEX) Rating: Buy | Risk: High | Price Target: $0.33

Breaking Away from the Peloton

James Bisinella | Analyst

+61 3 9268 1123 [email protected]

Jonathon Higgins | Senior Analyst

+61 3 9268 1182 [email protected]

Event We initiate on BikeExchange (ASX: BEX) with a Buy Recommendation and Price Target of $0.33 per share (65% upside).

Highlights • Globally leading online bicycle marketplace – BEX is an online, technology-driven global

marketplace connecting consumers with retailers of bicycle products and accessories. BEX generated $4.6m in revenues in FY21 (+26% YoY) across its eCommerce, Subscription and Media segments and currently operates in 8 countries with an annualised enquiry value of $1.6bn and $31m in TTV. We expect an acceleration in revenues to $10m by FY23e as the group deploys its IPO capital to deliver on its growth journey (currently ~$16m net cash with near term organic opportunities and M&A flagged).

• Concierge to capture significant captive audience – BEX has a significant opportunity to monetise the $1.6bn of annual enquiries currently generated on its platform. Concierge involves further automation, functionality and customer service improvements to better serve sales enquiries and is a current focus and strategic imperative of the group. With annualised TTV of $31m at 4Q21 and ~2.0% conversion of enquiries into successful transactions, over time we believe BEX has the potential to convert 10% post-concierge improvements, producing ~$160m in TTV at a 10% commission rate (currently 9%) inferring ~$16m of revenue or ~6.5x the current revenue run rate.

• Transaction commission upside to boost eCommerce revenue – The latest 4Q21 result saw a marked acceleration in eCommerce commissions rising from 7.9% to 9.0% (+1.1%). We expect BEX to drive a continued material uplift to commissions through a rise in take rates to 10.0% by FY24e, as part of a shift towards a heavier commission-based model which is less leveraged to subscription revenues (albeit still remaining important). We expect BEX to enter the transaction realm and for eCommerce revenue to represent a larger proportion of group revenue, rising from 12% in FY20 to 51% in FY23e (+~40%).

• Acquisitive upside in the near term – BEX has indicated that it is in active discussions relating to strategic acquisitions. We anticipate potential acquisitions in B2B (enabling brands, retailers and distributors) and B2C (creating a frictionless consumer experience). In our view, BEX has the ability to accelerate revenues through organic and acquisitive growth, exemplified by high quality peers such as Frontier Digital Ventures (FDV – Not Covered) which grew PF revenue from $3.8m in 2016 to ~$36.0m in 2020, showcasing the sheer scalability potential of classifieds businesses once the flywheel is turning.

• Highly capital efficient marketplace model – BEX is a marketplace, distinct from an eCommerce business and is less exposed to highly capital-intensive operations given it does not hold inventory. With contributed capital of just $28.3m prior to IPO, BEX is on average 37% more efficient than its peers at driving traffic to its platform (>28m visitations in FY21). This is a highly favourable dynamic in our view and shows significant potential for the group to drive organic growth towards its platform.

• Industry tailwinds and massive global TAM – The global bicycle market is forecast to grow at a 5.2% CAGR over the next 4 years to US$80.0bn in 2026, driven by the shift towards cycling as a mode of transport, environmental targets, global infrastructure and physical and mental health benefits. We expect BEX to dominate the growth opportunity globally as it aggressively pursues its marketplace ecosystem model.

• Risks – Technological change, competition, growth aspirations, cash burn, international operations, data breach, board and management risk, among others.

Recommendation BEX offers exposure to a leading eCommerce marketplace with significant upside potential upon monetising its large captive audience. With a vastly capital efficient model and recent high calibre management additions, we believe BEX has the platform and team to successfully execute upon its growth ambitions. Initiate with Buy Recommendation.

Shaw and Partners BEX – Equity Report – 3/08/2021 – Pg. 2

BikeExchange Ltd. operates in the e-commerce market of sales of bicycles and accessories. Its market consists of bicycles, accessories and parts. The firm bicycles are used by consumers as a mode of transportation, sport and leisure and recreational activities. The company was founded in 2007 by Sam Salter and Jason Wyatt and is headquartered in Sydney, Australia.


Contents SECTION 1: EXECUTIVE SUMMARY ...........................................................................................................4

SECTION 2: ENTERING THE TRANSACTION REALM ....................................................................................5

2.1 Monetising a captive audience ($1.6bn annualised enquiry value) ........................................................ 5

2.2 eCommerce penetration to rise & commissions to approach 10% in medium term (+100bps) ............. 5

2.3 Organic + acquisitive growth could produce a $50m revenue group (~10x current size) ....................... 6

2.4 Highly capital efficient model with above sector visitations / contributed capital ................................. 6

SECTION 3: KEY ASSUMPTIONS AND FINANCIALS .....................................................................................7

3.1 Revenue by segment ................................................................................................................................ 8

3.1.1 eCommerce Commissions ................................................................................................................ 8

3.1.2 Subscription revenues ...................................................................................................................... 9

3.1.3 Media & other services revenue .................................................................................................... 10

3.1.4 Total revenue by segment .............................................................................................................. 11

3.2 Revenue by geography ........................................................................................................................... 12

3.3 Delivering operating leverage ................................................................................................................ 12

SECTION 4: INDUSTRY ............................................................................................................................ 14

4.1 Significant global bicycle market with above system CAGR .................................................................. 14

4.2 Supportive thematics and sector tailwinds ............................................................................................ 14

SECTION 5: VALUATION ......................................................................................................................... 15

SECTION 6: SHARE STRUCTURE AND SHAREHOLDERS ............................................................................. 17

SECTION 7: BOARD AND MANAGEMENT ................................................................................................ 18

7.1 Board ...................................................................................................................................................... 18

7.2 Management .......................................................................................................................................... 19

SECTION 8: CORE DRIVERS AND CATALYSTS ............................................................................................ 20

SECTION 9: KEY RISKS ............................................................................................................................ 21


SECTION 1: EXECUTIVE SUMMARY

Company overview

BEX is an online, technology-driven global marketplace connecting consumers with retailers of bicycle products and accessories. BEX operates in 4 geographies / 8 countries, with an annualised enquiry value of $1.6bn and $31m in TTV (4Q21). BEX generates revenue through the following segments:

(1) eCommerce: Commission on sale of products and accessories on the BEX platform.

(2) Subscription revenue: Retail subscribers paying a fee to have a presence on the BEX marketplace.

(3) Media & Other Services: Media inventory and ancillary services sold by brands on the BEX platform.

Geographic footprint Revenue by geography (FY21)

TTV by geography (FY21)

* Both revenue and TTV are lookthrough (incl. 50% of Colombia JV performance)

Historical and forecast revenue by segment (P&L basis)

Key drivers and segment breakdown

Partnerships and key customers

• Trek partnership to enable dealer network of 1,500 cycling stores to

join the BEX platform to advertise and sell product across the US and

Canada.

• Cyclesoftware agreement to enable dealers to advertise and sell

product on the BEX platform across the Netherlands and

Belgium.

• Auteco agreement to grow BEX’s presence in Colombia and enter new

markets in LATAM. Auteco has >80% market share of electric 2-

wheeled vehicles and >700 POS in Colombia.

In aggregate, BEX has >1,600 active retail accounts with a range of

bicycle retailers across 8 countries (at FY21).

Upcoming / potential catalysts

• Commission rate expansion upside (currently 9.0% of TTV moving

towards 10.0% over the medium term in our view).

• Increased monetisation of captive audience and growth in

eCommerce share of revenue – $1.6bn in annualised sales leads has

potential to deliver $16m revenue at current-run rate over time.

• Revenue acceleration with Shaw estimating $7.2m or +55% YoY in

FY22e (BEX share).

• Geographic expansion / penetration (Europe, North America,

Colombia) and continued strength in Australia.

• Strategic acquisitions / M&A optionality in the near term with active

discussions currently underway.

Key financials and valuation

Source (page 4): Company data, Shaw and Partners analysis

ANZ

$1.5m31%

Europe

$2.3m47%

N. America

$0.8m15%

Colombia$0.3m / 7% ANZ

$5.1m20%

Europe

$15.4m61%

N. America$3.6m14%

Colombia

$1.2m / 5%

1.53.3

5.17.0

2.7 2.7 2.5

2.5

3.1

3.9

4.7

1.0 0.9 0.70.6

0.8

1.0

1.2

3.9 3.9 3.74.6

7.2

10.0

13.0

$0m

$2m

$4m

$6m

$8m

$10m

$12m

$14m

FY18 FY19 FY20 FY21 FY22e FY23e FY24e

eCommerce commissions Subscription Media and other services

SubscriptionseCommerceMedia & Other

Services

Segm

en

t

Media inventory / content sold by brands

on the platform

Ove

rvie

wD

rive

r

TTV xAvg. commission rate

No. of subscribers xAvg. subscription fee

Various media and content fees

Fee for % of transaction completed by

consumers on platform

Retailer & manufacturer subscription fees for platform presence

FY18 FY19 FY20 FY21 FY22e FY23e FY24e Valuation methodology Output Weight Value

Revenue by segment1 Revenue multiple $0.33 100% $0.33eCommerce commission $0.2m $0.3m $0.5m $1.5m $3.3m $5.1m $7.0m Valuation (per share) $0.33Subscription $2.7m $2.7m $2.5m $2.5m $3.1m $3.9m $4.7mMedia and other $1.0m $0.9m $0.7m $0.6m $0.8m $1.0m $1.2mTotal sales revenue $3.9m $3.9m $3.7m $4.6m $7.2m $10.0m $13.0m

Total operating expenses2 ($6.6m) ($7.8m) ($6.1m) ($9.7m) ($11.6m) ($12.8m) ($13.9m)

EBITDA (PF)2 ($2.7m) ($3.9m) ($2.4m) ($5.1m) ($4.5m) ($2.8m) ($1.0m)

Core driversTotal avg. subscription accounts2 943 1,002 863 760 983 1,154 1,316Total TTV (excl Colombia) $7.0m $7.4m $12.3m $24.1m $35.9m $54.4m $72.0mTotal eCommerce transactions 14,572 13,542 20,954 33,473 na na naAverage Commission rate na na 4.7% 9.0% 9.2% 9.5% 10.0%Total sales revenue growth na 0.8% (6.8%) 25.5% 55.4% 39.9% 29.5%1 Excludes Colombia (i.e. not lookthrough) / 2 FY21 represent Shaw estimates

$0.18

$0.20

$0.22

$0.24

$0.26

$0.28

Feb 21 Mar 21 Apr 21 May 21 Jun 21 Jul 21

Share price performance


SECTION 2: ENTERING THE TRANSACTION REALM

2.1 Monetising a captive audience ($1.6bn annualised enquiry value)

• BEX has built a significant and highly engaged captive audience since its establishment

in 2007, which has accelerated across ANZ, Europe, North America and LATAM.

• FY21 product enquiry value and traffic sessions have grown rapidly to $1.6bn (+53%

YoY) and >28m (+29% YoY) respectively at 4Q21 with BEX having a high level of visibility

across the end-to-end customer experience lifecycle.

• In our view there is an opportunity for BEX to convert a greater share of enquiry value

through its “concierge” service, which involves further automation, functionality and

customer service improvements to better serve sales enquiries.

• Annualised TTV of $31m (4Q21) infers ~2.0% conversion of enquiries into successful

transactions. BEX has a deep opportunity to convert a greater share of enquiries into

sales, with a near term target of 10% producing ~$160m in TTV, then layered across

a 10% commission rate infers ~$16m of revenue or ~6.5x the 4Q21 run rate.

Figure 1: eCommerce commission revenue on potential enquiry value penetration

Source: Company data, Shaw and Partners analysis

2.2 eCommerce penetration to rise & commissions to approach 10% in medium term

(+100bps)

• Currently at a blended rate of 9.0% (4Q21) and a marked acceleration from 7.9% in

the prior quarter, we expect BEX to drive a material uplift in eCommerce

Commissions through a gradual shift in take rates to 10.0% by FY24e.

• Over the same period, we expect eCommerce Commissions revenue to rise from $0.5m

in FY20 to $7.0m in FY24e, representing a larger proportion of group revenue growing

from 12% in FY20 to 51% in FY23e (+~40%).

• Our thesis around extracting greater value from commission rates is driven by

comparable marketplaces taking an average of 15.2%, with BEX at a ~40% discount

(~6% lower), representing an opportunity for BEX to bolster take rates over time.

Figure 2: eCommerce commission revenue and commission rates Figure 3: Commission rates by marketplace

Source: Company data, Shaw and Partners analysis Source: Company data, Shaw and Partners analysis

$2m

$6m

$9m

$13m

$3m

$8m

$12m

$16m

$0m

$2m

$4m

$6m

$8m

$10m

$12m

$14m

$16m

$18m

Current (~2.0%) 5.0% 7.5% 10.0%

eC

om

me

rce

re

ven

ue

s

Penetration on $1.6bn enquiry valueCurrent commission rates (~8%) Upside case commission rates (10%)

0.2 0.3 0.5

1.5

3.3

5.1

7.0

4.7%

9.0% 9.2% 9.5% 10.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

$0.0m

$1.0m

$2.0m

$3.0m

$4.0m

$5.0m

$6.0m

$7.0m

$8.0m


eCommerce Commissions (LHS) Average Commission Rate (RHS)

9.0

%

15

.0%

15

.0%

12

.0%

12

.6%

9.0

%

27

.5%

Avg. excl . BEX

15.2%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

BEX Airbnb Airtasker Amazon eBay Etsy Uber

~6

%d

isco

unt

to

avg

.


2.3 Organic + acquisitive growth could produce a $50m revenue group (~10x current size)

• BEX’s revenue base is highly diversified across segments and geography including

eCommerce, Subscriptions and Media revenues across ANZ, Europe, North America

and LATAM.

• BEX now has the capacity to deploy capital ($15.9m net cash at Jun-21) to undertake

strategic hiring of key resources, organic expansion and M&A. In the latest result BEX

indicated that the group is in active discussions relating to strategic acquisitions.

• In our view, BEX has the ability to reach a significant level of revenues given the

strength of its platform, size of audience and global reach. High quality comparable

companies such as Frontier Digital Ventures (FDV – Not Covered) grew pro-forma

revenue from $3.8m in 2016 to ~$36.0m in 2020, which shows the potential scalability

of classifieds businesses if management are able to execute on strategy.

• In our view, BEX has the platform and team in place to enter the transaction realm and

scale the business by multiples of its current size, noting Shaw estimate organic growth

in revenue from $3.7m in FY20 to $13.0m in FY24e (excludes any acquisitive revenue).

Figure 4: Revenue by segment (BEX share / P&L basis)


2.4 Highly capital efficient model with above sector visitations / contributed capital

• Previously capital constrained before its IPO in February 2021, BEX has a highly capital

efficient model and has formed a solid base and market leading platform to scale

both organically and through well considered acquisition.

• Distinct from traditional eCommerce players, BEX is a marketplace and is insulated

from traditional working capital constraints. Given current supply chain difficulties

across various sectors in the economy, BEX has lower inventory risk and an opportunity

to instead invest capital in its platform and focus on other accretive opportunities.

• With >28m website visits in FY21 and contributed capital of just $28.3m prior to IPO,

BEX is on average 37% more efficient than its peers at driving traffic to its platform.

The next phase in the growth story is to now effectively monetise the captive audience.

Figure 5: Website visitations / contributed capital (higher = better)


1.53.3

5.17.0

2.7 2.7 2.52.5

3.1

3.9

4.7

1.0 0.9 0.70.6

0.8

1.0

1.2

3.9 3.9 3.74.6

7.2

10.0

13.0

$0m

$2m

$4m

$6m

$8m

$10m

$12m

$14m



1.00 0.27 1.21 0.27 1.12 0.78

Avg. excl . BEX

0.73

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

BEX ABY BKG KGN MYD TPW

37% more

efficient

than avg.


SECTION 3: KEY ASSUMPTIONS AND FINANCIALS We model BEX on a half-by-half basis over 10 years, utilising drivers which include driver-based growth estimates by segment to generate our financial forecasts.

Figure 6: Key assumptions and forecasts

Source: Company data, Shaw and Partners analysis. 1 Represent actual results through to FY21, excludes Colombia which is equity accounted / 2 Shaw estimates.

FY18 FY19 FY20 FY21e 1H22e 2H22e FY22e 1H23e 2H23e FY23e 1H24e 2H24e FY24e

Jun-18 Jun-19 Jun-20 Jun-21 Dec-21 Jun-22 Jun-22 Dec-22 Jun-23 Jun-23 Dec-23 Jun-24 Jun-24

Core drivers

Revenue by segment1

eCommerce commission $0.2m $0.3m $0.5m $1.5m $1.6m $1.7m $3.3m $2.5m $2.7m $5.1m $3.4m $3.7m $7.0m

Subscription $2.7m $2.7m $2.5m $2.5m $1.4m $1.6m $3.1m $1.8m $2.1m $3.9m $2.3m $2.5m $4.7m

Media and other $1.0m $0.9m $0.7m $0.6m $0.4m $0.4m $0.8m $0.5m $0.5m $1.0m $0.6m $0.6m $1.2m

Total sales revenue $3.9m $3.9m $3.7m $4.6m $3.4m $3.7m $7.2m $4.8m $5.2m $10.0m $6.3m $6.7m $13.0m

Core drivers - subcriptions

Total avg. subscription accounts (ending)2 943 1,002 863 760 864 983 983 1,065 1,154 1,154 1,232 1,316 1,316

Avg annual revenue per subscription account (ending)1 $2,911 $2,725 $2,955 $3,428 $3,479 $3,531 $3,531 $3,653 $3,707 $3,707 $3,835 $3,893 $3,893

Core drivers - eCommerce1

Total TTV (excl Colombia) $7.0m $7.4m $12.3m $24.1m $17.5m $18.4m $35.9m $26.5m $27.9m $54.4m $35.0m $37.0m $72.0m

Average Commission rate (ending) na na 4.7% 9.0% 9.0% 9.2% 9.2% 9.3% 9.5% 9.5% 9.7% 10.0% 10.0%

Total eCommerce transactions 14,572 13,542 20,954 33,473 na na na na na na na na na

Average Order Value (ending) $223 $275 $436 $780 na na na na na na na na na

Financials

Profit and loss

Total sales revenue1 $3.9m $3.9m $3.7m $4.6m $3.4m $3.7m $7.2m $4.8m $5.2m $10.0m $6.3m $6.7m $13.0m

Total operating expenses ($6.6m) ($7.8m) ($6.1m) ($9.7m) ($5.7m) ($6.0m) ($11.6m) ($6.3m) ($6.6m) ($12.8m) ($6.8m) ($7.1m) ($13.9m)

EBITDA (PF) ($2.7m) ($3.9m) ($2.4m) ($5.1m) ($2.3m) ($2.2m) ($4.5m) ($1.4m) ($1.4m) ($2.8m) ($0.6m) ($0.4m) ($1.0m)

NPAT (PF) ($2.9m) ($4.5m) ($2.9m) ($5.2m) ($2.4m) ($2.3m) ($4.7m) ($1.5m) ($1.5m) ($3.0m) ($0.7m) ($0.5m) ($1.2m)

Cashflow

Operating cashflow ($2.8m) ($3.5m) ($0.7m) ($4.1m) ($1.0m) ($1.8m) ($2.8m) $0.1m ($0.9m) ($0.7m) $1.0m $0.3m $1.2m

Free cashflow ($2.9m) ($3.6m) ($0.7m) ($4.3m) ($1.1m) ($1.9m) ($3.0m) $0.0m ($1.0m) ($0.9m) $0.9m $0.2m $1.0m

Balance sheet

Cash balance1 na na $20.1m $15.9m $14.7m $12.9m $12.9m $12.9m $11.9m $11.9m $12.8m $13.0m $13.0m

Contributed equity na na $45.5m $45.5m $45.5m $45.5m $45.5m $45.5m $45.5m $45.5m $45.5m $45.5m $45.5m

Financial ratios

Growth rates (YoY)

Sales revenue (YoY) na 0.8% (6.8%) 25.5% na na 55.4% 41.4% 38.6% 39.9% 29.6% 29.3% 29.5%

EBITDA (PF) (YoY) na (46.0%) 37.3% (107.5%) na na 11.6% 36.7% 37.4% 37.1% 59.5% 70.8% 65.0%

NPAT (PF) (YoY) na (56.2%) 36.0% (80.4%) na na 10.6% 35.2% 36.0% 35.6% 56.7% 67.0% 61.8%

Margins

EBITDA (PF) margin (68.4%) (99.1%) (66.7%) (110.2%) (66.3%) (59.4%) (62.7%) (29.7%) (26.8%) (28.2%) (9.3%) (6.1%) (7.6%)

NPAT (PF) margin (74.3%) (115.2%) (79.2%) (113.9%) (69.2%) (62.1%) (65.5%) (31.7%) (28.7%) (30.1%) (10.6%) (7.3%) (8.9%)

Shaw and Partners BEX – Equity Report current as at –03/08/2021–Pg. 8

3.1 Revenue by segment

3.1.1 eCommerce

• BEX’s key growth avenue is the opportunity to monetise and capture value out of its

eCommerce segment.

• eCommerce commissions are revenues retained by BEX as a result of transactions

completed on its platform. Drivers of eCommerce revenues and our forecasts include:

▪ Total Transaction Value (TTV) on the BEX platform – $7.7m in 4Q21 (+24% YoY),

$24.1m in FY21 (+96% YoY), $35.9m in FY22e (+49% YoY) and $54.4m in FY23e

(+52% YoY). TTV is ultimately driven by the number of eCommerce transactions

undertaken on the BEX platform and the average order value (AOV).

▪ Commission rate charged by BEX which varies by product and category – 9.0% at

FY21 year end (+330bps YoY), with Shaw estimating 10.0% by FY24e (+100bps).

Figure 7: eCommerce transactions and average order value Figure 8: Total transaction value (TTV)


• In FY20, revenue for the eCommerce segment was just $0.5m before significantly

growing to $1.5m in FY21 (+227% YoY) and $2.4m annualised based on 4Q21 results,

showing an acceleration in the final quarter of the year.

• Historically, BEX has generated the majority of its revenues from Subscriptions (c. 70%

in FY20). Notwithstanding continued growth in Subscription revenues, we anticipate

eCommerce to rise from ~12% of group revenues in FY20 to ~51% in FY23e.

• Higher value items sold on the platform typically attract lower commission rates (as

low as 5%), whilst accessories generate up to 25%. On a blended basis, we expect

commissions to rise to ~10.0% of TTV by FY24e.

Figure 9: eCommerce commission rates (ending)


14,572 13,542

20,954

33,473

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

-

$100

$200

$300

$400

$500

$600

$700

$800

$900

FY18 FY19 FY20 FY21

eCommerce transactions (RHS) Average Order Value (LHS)

-

$10.0m

$20.0m

$30.0m

$40.0m

$50.0m

$60.0m

$70.0m

$80.0m


4.7%

9.0% 9.2% 9.5%10.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

FY20 FY21 FY22e FY23e FY24e


• Our estimates in terms of TTV and commission rates translates to eCommerce

commission revenue of $3.3m in FY22e (+120% YoY) and $5.1m in FY23e (+57% YoY).

Figure 10: eCommerce commission revenue


3.1.2 Subscription revenues

• Currently BEX’s largest revenue generating segment, Subscription revenues represent

monthly recurring subscriptions paid by retailers, manufacturers and brands, allowing

them to list their product inventories and transact on the platform.

• At 4Q21 there were 1,600 active retail accounts or average accounts of 760 (Shaw

estimates), paying an average annual subscription fee of $3,428 at 4Q21 (+5% on

3Q21) and translating to FY21 Subscription revenues of $2.5m (approx. flat YoY).

• Penetration in terms of total addressable market (TAM) by jurisdiction is about 75% in

ANZ and <10% in both Europe and North America.

▪ We estimate that the ANZ market is close to maturity on Subscription revenues,

and therefore forecast modest growth in subscriptions for ANZ.

▪ In Europe and North America, we forecast rising penetration over time, which is

driven by continued investment into these markets as well as the network effect

taking hold.

▪ Our view is that BEX has the potential to deliver similar penetration rates in the

European and North American markets (i.e. up to 50%), as has been done in ANZ,

which will involve continued investment in headcount and marketing.

• Through leveraging Subscriptions and retailers on the platform, we expect BEX to

convert a larger share of wallet or TTV into eCommerce revenues as a result of rising

average commission rates and investment in a more robust concierge service.

Figure 11: Average retail subscription accounts Figure 12: Average revenue per subscription account


0.2 0.3 0.5

1.5

3.3

5.1

7.0

$0.0m

$1.0m

$2.0m

$3.0m

$4.0m

$5.0m

$6.0m

$7.0m

$8.0m


-

200

400

600

800

1,000

1,200

1,400


$1,000

$2,000

$3,000

$4,000

$5,000



• Drivers of Subscription revenues and our forecasts include:

▪ Average number of retail Subscription accounts – 760 at 4Q21 (Shaw estimate),

983 at FY22e (+37% YoY) and 1,154 at FY23e (+17% YoY).

▪ Average revenue per Subscription account – $3,428 at 4Q21 (+16% YoY), $3,531

at FY22e (+3% YoY) and $3,707 at FY23e (+5% YoY).

• Our forecasts in terms of average retail subscription accounts and average revenue per

subscription accounts translates to Subscription revenue of $3.1m in FY22e (+23%

YoY), $3.9m in FY23e (+28% YoY), and $4.7m in FY24e (+21% YoY).

Figure 13: Subscription revenue


3.1.3 Media & other services revenue

• Media and other services revenues are generated from the sale of media inventory or

content on the BEX platform sold by brands and businesses, as well as revenue from

classified listings, feature upgrades for product listings and other ancillary services.

• As the number of retail subscriptions and traffic to the BEX platform rises, we expect

revenue in the media segment to rise from $0.6m in FY21 (down 4% YoY) to $0.8m in

FY22e (+30% YoY), $1.0m in FY23e (+20% YoY) and $1.2m in FY24e (+20% YoY).

Figure 14: Media & other services revenue


2.7 2.72.5 2.5

3.1

3.9

4.7

$0.0m

$0.5m

$1.0m

$1.5m

$2.0m

$2.5m

$3.0m

$3.5m

$4.0m

$4.5m

$5.0m


1.00.9

0.7 0.6

0.8

1.0

1.2

$0.0m

$0.4m

$0.8m

$1.2m

$1.6m



3.1.4 Total revenue by segment

• Across the BEX group, we expect group revenue to rise from $4.6m in FY21 to $7.2m

in FY22e (+55% YoY), $10.0m in FY23e (+40% YoY) and $13.0m in FY24e (+30% YoY).

• Importantly, we do not forecast any revenue from M&A opportunities, which we

expect are available to BEX across sales enablement, powering a more frictionless

customer experience across the end-to-end purchase and delivery of goods.

Figure 15: Total revenue by segment (BEX share)


• As discussed above, we anticipate a rising proportion of revenue from the eCommerce

segment as BEX shifts its monetisation strategy towards transactions and increases its

blended commission rates across the group.

• The shift in revenue sources in our view will see eCommerce revenues rise from 12%

of revenue in FY20 to 54% of revenue in FY24e, with strong revenues continuing from

the Subscription and Media segments but declining as a share of group contribution.

Transactional revenues are worth significantly greater multiples in eCommerce /

classifieds businesses globally in our view. We expect this segment to dominate growth

for BEX going forward.

Figure 16: Split of revenue by segment


• Note we model out Colombia at NPAT and equity account for a 50% contribution in

line with BEX group ownership. We conservatively forecast revenue of $0.4m in FY22e

and $0.6m in FY23e, resulting in immaterial contributions to NPAT and note the

potential for upside risk to our estimates.

1.53.3

5.17.0

2.7 2.7 2.52.5

3.1

3.9

4.7

1.0 0.9 0.70.6

0.8

1.0

1.2

3.9 3.9 3.74.6

7.2

10.0

13.0

$0m

$2m

$4m

$6m

$8m

$10m

$12m

$14m



5% 8% 12%

32%

46%51% 54%

70% 69%69%

54%

43%39% 36%

25% 23% 18% 14% 12% 10% 9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%




3.2 Revenue by geography

• BEX predominantly generates revenue across three geographies being ANZ, Europe,

North America. Additionally, BEX has a Colombia-based JV agreement with a 50% share

(equity accounted).

• We expect continued growth in ANZ however at a slower pace than Europe and North

America given the relative levels of maturity and forecast penetration.

• In Europe and North America, we forecast rising penetration over time in terms of both

eCommerce and Subscriptions, which is driven by continued investment into these

markets as well as a rising network effect in line with platform presence rising in

market.

• Our view is that BEX has the potential to deliver similar penetration rates in the

European and North American markets (i.e. up to 50%), as has been achieved in ANZ.

Figure 17: Revenue by segment and geography Figure 18: Share of revenue by geography


3.3 Delivering operating leverage

• BEX has three main operating expense lines consisting of employee benefits,

advertising & marketing and general & administration.

• Employee expenses consists of all facets of payroll related expenses globally,

advertising & marketing consists of costs associated with advertising such as pay per

click advertising, email and direct marketing activities, sponsorship and trade events

and finally general & administration includes overheads, technology licence fees,

travel, insurance and listed company costs.

• We expect expenses as a percentage of revenue to fall significantly from 167% in FY20

in the longer run as operating leverage comes through in BEX’s core opex buckets.

Figure 19: Operating expenses by bucket


1.8 1.6 1.5 1.5

1.0 1.1 1.1

2.3

1.1 1.21.0

0.83.9 3.93.7

4.6

$0m

$1m

$1m

$2m

$2m

$3m

$3m

$4m

$4m

$5m

$5m

FY18 FY19 FY20 FY21

ANZ Europe North America

46% 41% 41%33%

26%29% 31% 50%

28% 30% 28%16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY18 FY19 FY20 FY21

ANZ Europe North America

3.7 4.0 3.35.3

6.4 7.1 7.70.50.9

0.4

0.9

1.11.2

1.3

2.43.0

2.5

3.5

4.14.6

5.0

0%

40%

80%

120%

160%

200%

240%

$0m

$2m

$4m

$6m

$8m

$10m

$12m

$14m

FY18 FY19 FY20 FY21e FY22e FY23e FY24e

Employee benefits Advertising & marketingGeneral & administration Expenses % of revenue


• BEX has a capital light model with minimal capex required going forward on platform

build out. This is because BEX has an agreement with Marketplacer (an online

technology platform provider) across four BEX “hubs”, including platform services,

data analytics and other related services. Fees under the agreement per hub include:

▪ A fixed service fee of $10,000 per month.

▪ Revenue share of 1% per transaction.

▪ $30 per connection per month.

• Marketplacer facilitates the BEX platform through enhanced functionality and API’s

through to partner integration and inventory visibility.

• We expect BEX to continue utilising the Marketplacer platform across our forecast

spectrum given its growth alongside the company, allowing management to focus on

core business and directly revenue activities.

Figure 20: Revenue and expenses

\


• BEX has historically made pro-forma (PF) EBITDA losses across FY18 – FY20 (disclosed

historical periods) of $2.7m, $3.9m and $2.4m respectively.

• We anticipate BEX to turn its maiden EBITDA positive year in FY26e, given significant

growth and investment in the group. Our view is that marketplaces can be highly

scalable businesses, requiring minimal additional opex as growth is achieved and

expect to see significant operating leverage in future periods.

• Our EBITDA forecasts are conservative in our view, with upside potential if BEX

undertakes accretive acquisitions, executes on an above expected step change in the

transition to monetising transactions or begins to prioritise profitability over growth.

Figure 21: EBITDA and EBITDA margins

\


3.9 3.9

3.7 4

.6

7.2

10

.0

13

.0

6.6

7.8

6.1

9.7

11

.6 12

.8 13

.9

$0m

$3m

$6m

$9m

$12m

$15m

$18m


Total revenue Total opex

(120%)

(100%)

(80%)

(60%)

(40%)

(20%)

-

($6.0m)

($5.0m)

($4.0m)

($3.0m)

($2.0m)

($1.0m)

-


EBITDA (PF) (LHS) EBITDA (PF) margin (RHS)


SECTION 4: INDUSTRY

4.1 Significant global bicycle market with above system CAGR

• BEX is a leading global online marketplace connecting retailers, brands and consumers

through the sale of cycling products and accessories.

• BEX operates in the retail e‑Commerce industry and offers over 600,000 products from

over 1,500 brands across eight countries and four geographic regions including North

America, ANZ, Europe and LATAM.

• The global bicycle market is forecast to grow to US$65.4bn in 2022. Further, the market

is predicted to grow at a strong 5.2% CAGR over the following four years to US$80.0bn

in 2026.

Figure 22: Global bicycle market size

Source: Statista, Persistence Market Research, BEX Prospectus, Shaw and Partners analysis

4.2 Supportive thematics and sector tailwinds

• Key drivers to the proliferation of cycling globally include:

▪ Rising prevalence and push towards cycling as a form of transport.

▪ Environmental benefits (lower carbon emissions versus traditional motor vehicle

transportation).

▪ Physical and mental health benefits associated with cycling and exercise.

▪ Rising global infrastructure investment to support bicycle transportation.

• We highlight cycling’s share of transportation goals across a number of cities. Some of

these targets include a >10% rise over the next decade, underpinning our expectations

for the global cycling market to demonstrate an exceptional long term CAGR.

Figure 23: Cycling share of transportation goals by city

Source: Statista, Persistence Market Research, BEX Prospectus, Shaw and Partners analysis

40.243.6 45.6

60.365.4

80.0

-

US $10.0bn

US $20.0bn

US $30.0bn

US $40.0bn

US $50.0bn

US $60.0bn

US $70.0bn

US $80.0bn

US $90.0bn

2011 2015 2016 2019 2022 2026

1.0%

3.0%

15.0%

19.0%

2.0%

5.0%

3.0%

7.0%

25.0% 25.0%

7.0%

25.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Adelaide(by 2022)

Canberra(by 2026)

Hamburg(by 2030)

Hannover(by 2025)

Philadelphia(by 2020)

Portland(by 2050)

Current Target


SECTION 5: VALUATION • In undertaking our valuation, we rely upon a target revenue multiple having regard to

our comparable company analysis and based upon our view of the suitability of this

methodology for online classifieds businesses. The output of our valuation produces

our 12-month Price Target of $0.33 per share.

• We have built a domestic and international comparable peers table that is based upon

the following:

▪ Mostly classifieds businesses which are platforms generating subscription and

eCommerce type revenues, rather than eCommerce businesses with inventory

and high working capital exposure.

▪ Overall diverse range of sectors, with the majority exhibiting significantly above

market growth.

▪ High gross margin business models which are mostly profitable.

▪ Variety of domestic and international geographic exposure.

Figure 24: Peers table

Source: FactSet consensus estimates, company data, Shaw and Partners analysis Note: All dollar figures expressed in AUD (including last price, market cap and EV). Outliers highlighted in grey and excluded from average and median. 1 FY EV/Sales represents FY21 actual for BEX, whilst FY for EV/EBITDA and PE Ratio are based on FY20 actuals.

• In general, we note the following:

▪ BEX trades at a historical EV/sales (FY or FY21) multiple of 9.3x, which represents

a 35% discount to the peer group’s latest average multiple of 14.4x.

▪ BEX trades at a forward EV/sales (FY+1 or FY22) multiple of 6.0x, which represents

a 45% discount to the peer group’s latest average multiple of 10.8x.

FY FY+1 FY+2 FY+3 FY FY+1 FY+2 FY FY+1 FY+2

BikeExchange Australia $0.20 $59m $43m 9.3x 6.0x 4.3x 3.3x (8.4x) (9.5x) (15.1x) (5.9x) (13.3x) (20.6x)

Airbnb United States $195.92 $37.8bn $132.4bn 24.1x 15.2x 11.6x 9.4x na 109.2x 68.3x na na 1250.2x

Airtasker Australia $0.99 $408m $419m 17.7x 13.7x 10.5x 8.2x na na na na na na

Alibaba China $265.55 $726.7bn $635.4bn 4.8x 3.1x 2.5x 2.0x 24.9x 14.4x 11.2x 23.8x 20.2x 15.7x

Amazon United States $4,527.03 $2283.1bn $2302.6bn 3.9x 3.4x 2.8x 2.3x 28.8x 22.0x 17.1x 58.0x 62.1x 48.6x

Carsales Australia $22.04 $6.2bn $6.5bn 15.4x 14.7x 14.0x 12.8x 28.4x 25.8x 24.0x 48.8x 39.3x 33.0x

Domain Australia $4.93 $2.9bn $3bn 11.9x 10.3x 8.8x 7.9x 33.4x 29.6x 22.7x na 90.6x 54.5x

eBay United States $92.80 $63.2bn $69.4bn 4.5x 4.1x 3.8x 3.5x 13.8x 12.3x 11.1x 16.5x 17.3x 15.0x

Frontier Digital Ventures Malaysia $1.56 $535m $468m 17.8x 10.5x 7.9x 6.5x na na 173.4x na na na

hipages Australia $3.11 $404m $393m 8.4x 6.8x 7.1x 4.8x 82.1x 33.0x 25.6x na na 112.4x

REA Group Australia $166.43 $22bn $21.2bn 25.3x 24.1x 19.5x 16.9x 44.2x 39.6x 32.5x 154.7x 65.1x 51.5x

Zillow United States $144.56 $35bn $35.1bn 7.4x 4.5x 3.1x 2.1x 72.5x na 35.4x 624.7x 102.5x 74.0x

Cettire Australia $2.19 $835m $725m 14.0x na na na 205.8x na na 331.1x na na

Farfetch United Kingdom $68.19 $21.3bn $26.1bn 12.4x 8.0x 6.2x 4.7x na 735.2x 115.1x na na na

Etsy United States $249.66 $31.7bn $33.3bn 12.8x 9.8x 8.0x 6.1x 43.3x 34.3x 27.0x 52.0x 58.8x 48.8x

Uber United States $59.13 $111bn $118.7bn 7.4x 5.3x 3.8x 2.9x na na 57.2x na na na

Airbnb United States $195.92 $37.8bn $132.4bn 24.1x 15.2x 11.6x 9.4x na 109.2x 68.3x na na 1250.2x

Adevinta Norway $26.15 $26.9bn $28.6bn 18.2x 14.5x 9.7x 8.4x 67.2x 46.7x 26.8x na 106.1x 57.6x

Prosus Netherlands $120.75 $196.2bn $144.1bn 28.1x 19.9x 15.6x 13.1x na na 571.2x 18.9x 22.4x 17.5x

Peers (all)

Average 14.4x 10.8x 8.6x 6.5x 43.9x 28.6x 26.4x 53.2x 53.6x 38.0x

Median 13.4x 10.3x 8.0x 5.5x 38.4x 29.6x 25.6x 48.8x 58.8x 48.6x

BEX premium/(discount) to peers (all)

Premium/(discount) to average (35.3%) (44.6%) (50.5%) (49.2%) na na na na na na

Premium/(discount) to median (30.8%) (42.2%) (46.5%) (39.8%) na na na na na na

Peers (EV <$0.5bn)

Average 14.6x 10.3x 8.5x 6.5x 82.1x 33.0x 25.6x na na na

Median 17.7x 10.5x 7.9x 6.5x 82.1x 33.0x 25.6x na na na

BEX premium/(discount) to peers % (EV <$0.5bn)

Premium/(discount) to average (36.6%) (42.1%) (49.9%) (49.3%) na na na na na na

Premium/(discount) to median (47.5%) (42.9%) (45.9%) (49.3%) na na na na na na

Market

capCompany

Country

(headquarters)

Last

priceEV

EV/EBITDA PE RatioEV/Sales1


▪ Classifieds or eCommerce focussed peers typically transact on an EV/sales

multiple due to rapid growth and the expectation of producing high EBITDA

margins at scale. Therefore, we view our applied valuation methodology as

appropriate given BEX’s current focus on growth and expectation of longer-term

profitability.

▪ BEX is significantly smaller than most peers and is a number of years away from

producing a profit based on our estimates. However, we anticipate BEX will scale

at a more rapid pace in relative terms and is growing revenues at a faster rate

than the majority of peers.

• In order to derive our valuation output, we have applied a revenue multiple of 10.0x

on FY24e revenue of $13.0m, discounted to the date of this report at our WACC of

11.7%. Our valuation is fully diluted and inclusive of all options and performance rights

outstanding.

• We note that our revenue multiple assumption of 10.0x represents a significant

discount to the historical trading multiple of the peer set of 14.4x and a discount to the

average forward (2021) multiple of 10.8x.

Figure 25: Target revenue multiple assumptions and output

Source: Shaw and Partners analysis

• A key tenement in our investment thesis and forecasts is that the group has invested

materially in human capital, marketing and R&D post a period of material

underinvestment under private ownership.

• In general, our view is that our valuation is supported by the following:

▪ Market leading platform that is growing in terms of exposure, TTV volumes and

quality.

▪ Although not modelled into our forecast, the expectation of accretive strategic

acquisition opportunities over time.

▪ Further investor interest over time as market capitalisation, scale and profile rises.

Variable ValueFY24e revenue $13.0mTarget revenue multiple 10.0xEnterprise value (EV) $129.6mNet (debt)/cash $13.0m

Fully diluted shares 311.1mValue per share $0.46Time 2.9 yearsWACC 11.7%Valuation (per share) $0.33


SECTION 6: SHARE STRUCTURE AND SHAREHOLDERS • BEX was co-founded in 2007 by Sam Salter and Jason Wyatt and listed on the ASX in

February 2021, raising $20m through the issuance of 76.9m shares at $0.26 per share.

At the IPO issue price, BEX had a market capitalisation of $76.2m.

Figure 26: Share price

Source: Company data, FactSet

• We note significant board and management ownership as shown in the table below.

Figure 27: BEX shareholders

Source: Company data, Shaw and Partners Analysis

• In terms of optionholders, we note two classes being (1) IPO Optionholders and (2)

Long Term Incentive Plan (LTIP) Optionholders.

• Firstly, IPO Options were issued at the IPO offer price ($0.26) with an exercise date 12

months after listing and an expiry date 72 months after listing.

Figure 28: IPO Optionholders


• Secondly, LTIP options exercisable at $0.45 with an exercise date 36 months after

listing and an expiry date 72 months after listing. The options vest across three

anniversaries subject to various revenue CAGR requirements as shown in Figure 29

below.

Figure 29: LTIP Option grant conditions Figure 30: LTIP Optionholders



$0.18

$0.20

$0.22

$0.24

$0.26

$0.28

Feb

21

Mar

21

Apr

21

May

21

Jun

21

Jul

21

Shareholder Description / controlling partyNo of shares

(undiluted)

% of ordinary

shares

GTR Ventures / Emerson Ryan Andrew Ryan (NED) 87.6m 29.9%

Saltsam / WSG Holdings (39%) Sam Salter (NED) 30.1m 10.3%

Surfwax / WSG Holdings (39%) Jason Wyatt (associate of Jade Wyatt, NED) 30.1m 10.3%

WSG Holdings (22%) Other parties 2.8m 1.0%

Other BEX shareholders Other parties 26.8m 9.2%

Bombora Investment Management Investment management fund 24.4m 8.3%

Other existing shareholders 14.1m 4.8%

IPO shareholders 76.9m 26.3%

Total 293.0m 100.0%

IPO Option holder Description / controlling party No of options% of fully diluted

shares

Gregg Taylor Independent Non‑Exec Chairman 2.0m 0.64%

Sam Salter NED 1.0m 0.32%

Bryan Zekulich NED 1.0m 0.32%

Jade Wyatt NED 1.0m 0.32%

Andrew Ryan NED 1.0m 0.32%

Mark Watkin CEO 1.3m 0.42%

Andrew Demery CFO 0.5m 0.16%

Other key execs and employees 1.3m 0.42%

Total 9.1m 2.93%

Grant date anniversary Revenue target CAGR

First $6.0m 150.0%

Second $9.1m 225.0%

Third $13.6m 338.0%

LTIP option holderDescription /

controlling partyNo of options

% of fully diluted

shares

Mark Watkin CEO 3.6m 1.16%

Andrew Demery CFO 1.8m 0.58%

Other key executives 3.45m 1.11%

Key employees 0.15m 0.05%

Total 9.0m 2.89%


SECTION 7: BOARD AND MANAGEMENT

7.1 Board

Gregg Taylor – Independent Non‑Executive Chairman Gregg has been a director of the BEX since October 2018. In the last 8 years, Gregg played a key role in introducing 7 new companies to the ASX and raising significant equity growth capital for various ASX and NZX listed companies.

Gregg has a Bachelor of Commerce degree from the University of Wollongong and was a CFA Charter holder. Gregg has 20 years of international business experience in financial markets, technology, sports administration, media and retail. He has founded and managed multiple global operating businesses in sports, retail and media sectors.

Sam Salter – Executive Director, Chief Sales and Partnerships Officer Sam is the co‑founder, Executive Director and Chief Sales and Partnerships Officer of BEX. Sam is also the co‑founder and a director of Marketplacer, which operates a global technology SaaS platform that creates online marketplaces to connect consumers, retailers, wholesalers and private sellers.

Sam has over 13 years’ experience developing marketplaces for businesses. Sam holds a Bachelor of Psychology and Sociology from the Victorian University of Technology.

Andrew Ryan – Non‑Executive Director Andrew’s career over the past 20 years has spanned across a wide variety of industries including manufacturing, distribution, agriculture, hospitality, sport and tourism.

Andrew is an active director in a number of companies such as Mitchelton Wines, Jayco, Mitchelton-SCOTT professional cycling team, My Local Broker, Marketplacer and the Prince Hotel and has been on the board of BEX since May 2020.

Andrew holds a degree in Business Advertising from RMIT and an Executive MBA from Bond University. He is a committee member of ‘The Million Dollar Lunch’ which fundraises and networks in support of the Children’s Cancer Foundation.

Jade Wyatt – Non‑Executive Director Jade has over 23 years’ experience in the specialty retail sector and is a long‑term employee of the Just Group. Her most recent roles have been Group General Manager of Portmans and she is currently Group Apparel Executive working across multiple brands.

Jade’s customer focused product led strategic approach to retail has resulted in driving strong results and increased shareholder value.

Bryan Zekulich – Independent Non‑Executive Director Bryan has been a director of BEX since August 2019.

Bryan was the managing partner of Ernst & Young’s Private Equity Sector for over 15 years. Bryan is also a board member, the treasurer and the company secretary of the Australian Investment Council (formerly the Australian Private Equity and Venture Capital Association).

Bryan is currently the portfolio manager and partner of Bombora and has significant experience in the Australian M&A market including in respect of M&A, divestments, strategic finance, capital raisings and advising on ASX listing requirements.

Bryan has a Bachelor of Commerce from the University of Western Australia and is a fellow of the Institute of Chartered Accountants of Australia and a fellow of the Financial Services Institute of Australia.


7.2 Management

Mark Watkin – Global Chief Executive Officer Mark began his career at Saatchi & Saatchi in London before spending four years at an independent digital agency, Hyperlink Interactive. In Australia, Mark worked for George Patterson Y&R Melbourne for approximately seven years before becoming Managing Director of TBWA Melbourne and then Managing Director of BWM Dentsu Melbourne.

Mark holds a Bachelor of Arts (Honours) in Business Studies and Marketing from Middlesex University and a Diploma in Business and Finance from the University of Westminster.

Andrew Demery – Chief Financial Officer Andrew has 20 years of listed company financial reporting experience through executive, auditing and consulting work in Australia and the UK.

Most recently, Andrew was the CFO of Carsales, an ASX 100 listed group. He was responsible for all global finance and investor relations activities of the Company. Prior to Carsales, Andrew was an Assurance Director/Senior Manager at PricewaterhouseCoopers, which included transformation initiative roles and M&A.

Andrew holds a Bachelor of Science (Hons) from the University of London and is a member of the Institute of Chartered Accountants of Scotland.

Sam Salter – Executive Director, Chief Sales and Partnerships Officer See above.


SECTION 8: CORE DRIVERS AND CATALYSTS Our investment thesis for BEX is driven by the following:

Best-in-breed platform BEX is the largest omni‑channel operator in Australia supporting cycling retailers and brands, as well as having a strong market presence globally across the US, Europe and LATAM. BEX’s platform is seen as market leading in terms of range, customer service and pricing. Over time, we expect business models such as BEX which exhibit market leading offerings and high levels of customer satisfaction to deliver long term shareholder returns.

Entry into further markets likely BEX currently has a platform presence across a number of countries including Australia, the US, Germany, Colombia, Belgium and the Netherlands. We anticipate BEX to expand into further geographies, leveraging its existing technology stack and expertise. If execution is successful, we expect considerable upside will be available to the business along with a possible step change in growth.

Operating leverage emerging Key operating expenses for BEX include employee costs, advertising and marketing and general and administration. We expect these expenses to decline as a percentage of revenue over time as BEX scales its business and continues to drive performance across its eCommerce and Subscription segments.

Potential M&A optionality With a number of corporate and strategic transactions taking place in the eCommerce sector and a moderate level of fragmentation across competitors in the space, we see potential for BEX to undertake active industry consolidation. Additionally, given its increasing growth profile and global exposure, BEX itself may also attract acquisitive interest from competitors or financial sponsors.

Favourable industry thematics and tailwinds The global push towards increased cycling infrastructure planning and investment is accelerating across the globe, in line with the rising trend towards cycling for transport and recreational purposes. The market has continued to evolve and has been augmented due to a global shift towards a focus on environmental and health awareness. We anticipate a continuation of these tailwinds, which will favour BEX in our view.


SECTION 9: KEY RISKS Risks to our investment thesis include although are not limited to:

Technological change We see BEX’s platform as purpose built and technologically competitive with other platforms in market. However, this may not always be the case due to technological changes. These changes may lead to a requirement for BEX to redevelop its products in order to meet dynamic user requirements.

Competition Whilst BEX’s platform is one of several available in its key markets and superior in our view, new competition or intensified competition from existing operators may result in a reduction in subscriptions, TTV or commission rates.

Growth aspirations BEX has global ambitions and has attained a level of penetration amongst users in its key geographies. The company has ambitions to continue to grow materially and deliver a step change in growth. There is no guarantee that BEX has the team in place or skills to navigate its growth aspirations.

Cash burn BEX has historically delivered negative cash flows and is forecast to reach positive cash flows in the future. There is a risk that positive cashflow is not achieved in line with our forecast. Companies that have negative cash flows typically exhibit greater volatility and there is no guarantee that BEX will be able to continue financing the business or that the group will reach profitability.

Churn, stickiness and LTV BEX is still at the inception of growth in terms of the total addressable market opportunity. There is no guarantee that subscribers and end users will continue utilising BEX’s services. Higher churn may in turn decrease the total lifetime value (LTV) of BEX subscribers, adversely impacting valuation.

International operations The company offers products and services via an online platform, but services these operations through sales and support across multiple countries and several geographic regions. As such BEX is subject to an elevated level of currency, execution and cost risk.

Small cap illiquidity and volatility As a small cap company, BEX exhibits higher levels of volatility and lower liquidity than the broader market in general. This beta is magnified during periods of market upheaval, such as the current Covid environment.

Data breach BEX utilises cloud-based storage for the majority of its data. We note BEX may experience hacking or stolen information that could adversely affect the operations and reputation of the group.

Key board and management risk BEX’s board and management are collectively large shareholders in the group. Failure to retain and grow executive talent may adversely impact the group’s growth. Moreover, this risk is elevated for businesses experiencing material growth over a short time horizon, such as BEX.


Rating Classification

Buy Expected to outperform the overall market

Hold Expected to perform in line with the overall market

Sell Expected to underperform the overall market

Not Rated Shaw has issued a factual note on the company but does not have a recommendation

Risk Rating

High Higher risk than the overall market – investors should be aware this stock may be speculative

Medium Risk broadly in line with the overall market

Low Lower risk than the overall market

RISK STATEMENT: Where a company is designated as ‘High’ risk, this means that the analyst has determined that the risk profile for this company is

significantly higher than for the market as a whole, and so may not suit all investors. Clients should make an assessment as to whether this stock

and its potential price volatility is compatible with their financial objectives. Clients should discuss this stock with their Shaw adviser before making

any investment decision.

Distribution of Investment Ratings

History of Investment Rating and Target Price - Bikeexchange Ltd

08/18 12/18 04/19 08/19 12/19 04/20 08/20 12/20 04/21 08/21$0.2

$0.2

$0.2

$0.3

$0.3

$0.3

$0.3

$0.3

Bikeexchange Ltd Target Price

Buy


Disclaimer

Shaw and Partners Limited ABN 24 003 221 583 (“Shaw”) is a Participant of ASX Limited, Chi-X Australia Pty Limited and holder of Australian Financial Services Licence number 236048. ANALYST CERTIFICATION: The Research Analyst who prepared this report hereby certifies that the views expressed in this document accurately reflect the analyst's personal views about the Company and its financial products. Neither Shaw nor its Research Analysts received any direct financial or non-financial benefits from the company for the production of this document. However, Shaw Research Analysts may receive assistance from the company in preparing their research which can include attending site visits and/or meetings hosted by the company. In some instances the costs of such site visits or meetings may be met in part or in whole by the company if Shaw considers it is reasonable given the specific circumstances relating to the site visit or meeting. As at the date of this report, the Research Analyst does not hold, either directly or through a controlled entity, securities in the Company that is the subject of this report, where they do hold securities those interests are not material. Shaw restricts Research Analysts from trading in securities outside of the ASX/S&P100 for which they write research. Other Shaw employees may hold interests in the company, but none of those interests are material. DISCLAIMER: This report is published by Shaw to its clients by way of general, as opposed to personal, advice. This means it has been prepared for multiple distribution without consideration of your investment objectives, financial situation and needs (“Personal Circumstances”). Accordingly, the advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not the advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of your Shaw client adviser. This report is provided to you on the condition that it not be copied, either in whole or in part, distributed to or disclosed to any other person. If you are not the intended recipient, you should destroy the report and advise Shaw that you have done so. This report is published by Shaw in good faith based on the facts known to it at the time of its preparation and does not purport to contain all relevant information with respect to the financial products to which it relates. The research report is current as at the date of publication until it is replaced, updated or withdrawn. Although the report is based on information obtained from sources believed to be reliable, Shaw does not make any representation or warranty that it is accurate, complete or up to date and Shaw accepts no obligation to correct or update the information or opinions in it. If you rely on this report, you do so at your own risk. Any projections are indicative estimates only and may not be realised in the future. Such projections are contingent on matters outside the control of Shaw (including but not limited to market volatility, economic conditions and company-specific fundamentals) and therefore may not be realised in the future. Past performance is not a reliable indicator of future performance. Except to the extent that liability under any law cannot be excluded, Shaw disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence. Depending on the timing and size of your investment, your portfolio composition may differ to the model. Performance figures are derived from the inception date of the model and its investment transactions from that date, therefore the performance for your portfolio may be different. If you have any questions in connection with differences between your portfolio and the model, you should speak with your adviser. IMPORTANT INFORMATION TO CONSIDER: It is important that before making a decision to invest in a Shaw Managed Accounts, a managed fund, an exchange traded fund, an individual hybrid security or listed debt instrument that you read the relevant Product Disclosure Statement (“PDS”). The PDS will contain information relevant to the specific product, including the returns, features, benefits and risks. The PDS can be found at: www.shawandpartners.com.au/media/1348/shawmanagedaccounts_pds.pdf. RISKS ASSOCIATED WITH HYBRID SECURITIES: Hybrid securities and listed debt instruments differ from investments in equities and cash products in a number of important respects. The liquidity risk associated with an investment in hybrid securities and listed debt instruments will generally be greater than that associated with equities. The credit risk associated with hybrid securities and listed debt instruments is higher than that of a cash product or term deposit. Some hybrid securities may be perpetual in nature, meaning that they can only be redeemed or exchanged for cash or equity at the issuer’s option. Hybrids may also contain terms which automatically trigger the deferral of an interest payment or cause the issuer to repay the hybrid earlier or later than anticipated. ASIC has published information to assist consumers in understanding the risks and benefits associated with an investment in hybrid securities or listed debt instruments. This information can be found under the heading ‘Complex Investments’ at www.moneysmart.gov.au/investing. DISCLOSURE: Shaw will charge commission in relation to client transactions in financial products and Shaw client advisers will receive a share of that commission. Shaw, its authorised representatives, its associates and their respective officers and employees may have earned previously or may in the future earn fees and commission from dealing in the Company's financial products.

http://www.shawandpartners.com.au/media/1348/shawmanagedaccounts_pds.pdf

http://www.moneysmart.gov.au/investing

bikeexchange ltd (bex)

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