Broker's take: DBS downgrades Y Ventures to 'hold'

DBS Group Research has downgraded e-commerce firm Y Ventures Group to 'hold' from 'buy' on potential short-term delays in generating sales from new third-party brands, lower-than-expected sales of private labels due to challenges in establishing supply chains and "cost escalation" from expansion in geographical footprint and customer base.

The broker also lowered Y Venture's target price to S$0.48 from S$0.77 previously, but said it will relook its recommendation once Y Ventures shows success in tackling the challenges above.

Catalist-listed Y Ventures "could take time in setting up new logistics and distribution networks, particularly in segments other than books," which could potentially delay revenue contributions from new partnerships, said DBS.

The broker revised down the firm's fiscal 2018 and 2019 revenue by 11 and 14 per cent respectively on potential short term delays in sales from new third-party brands coming aboard Y Venture's platform, and "slower than expected ramp up of private label sales, particularly of Faire Leather, due to challenges in establishing supply chains despite strong demand".

However, if Y Venture's Aora initial coin offering (ICO) is fully subscribed, it could be a catalyst for the stock, showcasing "investor confidence" in the Aora platform, DBS said.

In late July, Y Ventures became the first Singapore-listed firm to launch an ICO of its own, involving its new Aora Coin cryptocurrency. The expected US$50 million in proceeds will go towards development of the group's Aora e-commerce platform.

Y Ventures hopes to book proceeds from the ICO in its fiscal first half of 2019, DBS said.

The counter last traded on Friday, Aug 24, at 43.5 Singapore cents apiece.