Good Bear case. Thanks. The other side of the coin is camplify is still very small and buildings its network effect, in fact investing into its car owners, marketing to establish a network effect marketplace. Insurance does make a large expense on the owners side, but there is zero reason why these expenses should not be transferred to the owners side esp when scale is reached. In fact, I think the gross profit will be > 50%, and we will likely see this in the future. Re transaction growth, they are more limited by Car availability than by demand, which is a great index of success for emerging marketplace. Its all about cost go get a new car for now which is dropping fast. It is not hard to imagine a scale where getting an incremental car goes fully organic, which changes the whole math here and is not taken into account. Then, the fact is this market is at its very beginning. Since RV ownership is very expensive, it is almost certainty peer to peer trusted platform can help offset the cost and even offer an opportunity to generate income renting fleet at double digit yields, and we already see budding businesses established on the platform (even before managed services). at less than 1% of the market, before the NZ intl traveler, not to speak of the possibility to become a more dominant player in the EU, I think growth in transaction is going to increase. Then, one has to take into account that like other marketplaces, the take rate is not fully develped. I can think of many initiatives to provide more service for a small fee, which will all translate to a better gross profit. And that is pre M&A. So to conclude, while you raise a fair bear case, I think in this type of emerging platform deeper work has to be done. It may not be the right investment at this time, but things could change very fast.
Most definitely - I took the following line out - probably should have kept it in.
"Of course, I could just be making mountains out of molehills here. At the end of the day, Camplify's future returns will depend entirely on whether it can be the dominant camper van marketplace or not. If it works, it's likely to be a multi bagger from here."
Few other things:
- On volume growth - the lack of RV acquisition acceleration, despite big increase in spending - is part of the worry. Given how underpenetrated it is even in Australia, if it's such a no brainer deal for RV owners, it should not be slowing down like it did in FY22 IMO.
- Insurance margins: I thought about this a bit - rental companies certainly seem to gouge you for insurance fees! However, I don't know of many auto insurance businesses with <80% combined ratio, never mind 50%. And that's at true full scale. Could Camplify gouge customers and earn higher margins? Maybe - but I'd rather not bet on it.
- On NZ international growth - I understand there's a big upswing that will likely happen this year, but in context of the business, not sure if it is actually that meaningful. Even if NZ tripled, including acquired biz, it'll contribute ~10% to overall growth.
I def don't want to misrepresent myself here - I do love the business and see all the optionality that come with it on the upside. Perhaps it's just an indication of how much "faith" you need to see through the current numbers and have a clear vision of where this is going!
Good Bear case. Thanks. The other side of the coin is camplify is still very small and buildings its network effect, in fact investing into its car owners, marketing to establish a network effect marketplace. Insurance does make a large expense on the owners side, but there is zero reason why these expenses should not be transferred to the owners side esp when scale is reached. In fact, I think the gross profit will be > 50%, and we will likely see this in the future. Re transaction growth, they are more limited by Car availability than by demand, which is a great index of success for emerging marketplace. Its all about cost go get a new car for now which is dropping fast. It is not hard to imagine a scale where getting an incremental car goes fully organic, which changes the whole math here and is not taken into account. Then, the fact is this market is at its very beginning. Since RV ownership is very expensive, it is almost certainty peer to peer trusted platform can help offset the cost and even offer an opportunity to generate income renting fleet at double digit yields, and we already see budding businesses established on the platform (even before managed services). at less than 1% of the market, before the NZ intl traveler, not to speak of the possibility to become a more dominant player in the EU, I think growth in transaction is going to increase. Then, one has to take into account that like other marketplaces, the take rate is not fully develped. I can think of many initiatives to provide more service for a small fee, which will all translate to a better gross profit. And that is pre M&A. So to conclude, while you raise a fair bear case, I think in this type of emerging platform deeper work has to be done. It may not be the right investment at this time, but things could change very fast.
Most definitely - I took the following line out - probably should have kept it in.
"Of course, I could just be making mountains out of molehills here. At the end of the day, Camplify's future returns will depend entirely on whether it can be the dominant camper van marketplace or not. If it works, it's likely to be a multi bagger from here."
Few other things:
- On volume growth - the lack of RV acquisition acceleration, despite big increase in spending - is part of the worry. Given how underpenetrated it is even in Australia, if it's such a no brainer deal for RV owners, it should not be slowing down like it did in FY22 IMO.
- Insurance margins: I thought about this a bit - rental companies certainly seem to gouge you for insurance fees! However, I don't know of many auto insurance businesses with <80% combined ratio, never mind 50%. And that's at true full scale. Could Camplify gouge customers and earn higher margins? Maybe - but I'd rather not bet on it.
- On NZ international growth - I understand there's a big upswing that will likely happen this year, but in context of the business, not sure if it is actually that meaningful. Even if NZ tripled, including acquired biz, it'll contribute ~10% to overall growth.
I def don't want to misrepresent myself here - I do love the business and see all the optionality that come with it on the upside. Perhaps it's just an indication of how much "faith" you need to see through the current numbers and have a clear vision of where this is going!