Morning Mumble: Appliance Online (AO) what next? A short piece...and the week.

For those following the story of Appliance Online, it listed at a massive valuation compared to its profit from the previous year. Appliance Online do just that...white goods and small appliances only. Well my figures do not stack up on that valuation and it comes as no surprise, having modelled the company, that is the reason why I am short. 

The important part that needs to be considered is the expanding offerings from AO. AO, with the "marketing concept" and heavy push means they have to start offering other electrical items within 5 weeks to keep the psychology of the model moving forward. This needs to be continued, almost akin to "Shake and Vac" marketing, for those that know about that advertising benefits of that brand that had astronomical results when advertised at regular intervals...

Its likely within this new offering of TV's that Appliance Online will sell a unique brand as well; say from a company that already produces components and parts for larger and well known manufacturers such as Samsung and Panasonic. So I envisage AO offering a new line called HiSense or similar. They're already selling under that brand in the US and a limited degree in the UK, but I expect them to do some form of quality launch with exclusivity for AO.com leveraging off the back of manufacturing parts for other more well-known companies. 

Whatever appliance online do, in the short-to-mid-term it won't justify the stupid valuation it currently has. Profits are a must and it's not just "about cashflow", shareholders want more, or at least should. It will be interesting to see if the psychology of the AO model means the launch will happen within the 5 week window to keep "the news beat consistent" and maintain people's interest. Only time will tell, but due to the nature of the market, its my a risk I have to factor into the shorts. 

The concept, of warranties must underpin AO more so than any other brand. A dishwasher has a "lifetime warranty" for only £6.95 a month for Dishwashers... that's  £83.40 a year. It's a lifetime warranty so when you cancel you cannot renew it (fear) but more importantly with the average white goods costs being around 450 you're paying for a new one every five years ish. Interesting concept, buy one pay for two just in case on breaks down/has a fault. I won't debate the statutory rights a customer has under the Sale of Goods Act here, but you get the idea. So for now I remain short...but am wary of news so will be looking to close down at points prior to my five week deadline. 

To elaborate further on Friday's commentary, its rumoured there is going to be an APR Energy and Aggreko tie up (I'd give it the caveat of a significant BS Rating). Some, including myself, cannot see the benefits save for the additional savings in one set of group costs. Would the brands be able to hold their share as one entity? Hmmm...A lot of gossip at the moment but time will tell, the main difference could be that APR use gas and Aggreko's main set uses oil a positive when combined in terms of offerings. 

For the shorters than don't just focus myopically on one area it should have been a very good week, in fact exceptional and some stocks benefiting from parties buying back (closing their shorts). There's a renewed negativity in the market that for some strange reason a lot of funds have started to reduce their risks exposure on a very predictable format but as a herd; the outcome is obvious is it not? The question is, what took them so long to realise? Perhaps someone can enlighten me on the situation, but the situation does not look good for the longs, save for the rumblings of MRW being taken private. 

Atb Fraser