Overstone UCITS Global Smaller Companies Fund on HelloFresh SE
Thesis
HelloFresh has suffered falling meal-kit orders, expensive customer acquisition and difficulties stabilizing ready-to-eat operations. Management is reducing promotion to favor profitable, persistent customers, even if near-term sales fall. With more than €6 billion of revenue and at least €350 million of guided EBITDA against a market value near €350 million, shares trade for less than 0.1 times sales. If revenue stabilizes and the market values the business at half of sales, the fund estimates almost tenfold share-price upside. The managers acknowledge a wide range of outcomes, and the holding has shrunk to 2% of assets.
“If management can stabilise the customer base and the business simply stops shrinking, even a valuation at half sales would result in nearly ten times the current share price.”
Key risks
- Orders fell 13.7% and revenue declined 7.8% in the quarter.
- Customer acquisition costs remain high.
- The ready-to-eat operation has not stabilized.
- Prior expectations for business stabilization proved too optimistic.