New owners for Cycle Lab and Pro Shop

[GLuvsMtb]

http://www.fin24.com/Companies/Financial-Services/old-mutual-unit-buys-largest-sa-golf-store-20151202

 

It is quite interesting that Old Mutual sees the upside in the top end of the middle class.

 

Hopefully it also means a new executive structure and management structure as Cycle Lab in particular must be one of the most undervalued brands in SA at present.

 

PS: Is Cycle Lab really our largest Cycling Retailer? I would think that Specialized and their concept stores would push more product in terms of units and turnover.

[EmptyB]

http://www.fin24.com/Companies/Financial-Services/old-mutual-unit-buys-largest-sa-golf-store-20151202

 

It is quite interesting that Old Mutual sees the upside in the top end of the middle class.

 

Hopefully it also means a new executive structure and management structure as Cycle Lab in particular must be one of the most undervalued brands in SA at present.

 

PS: Is Cycle Lab really our largest Cycling Retailer? I would think that Specialized and their concept stores would push more product in terms of units and turnover.

 

Maybe some new broom sweeps clean.....should be good in my view.

[jannosmit]

http://www.fin24.com/Companies/Financial-Services/old-mutual-unit-buys-largest-sa-golf-store-20151202

 

It is quite interesting that Old Mutual sees the upside in the top end of the middle class.

 

Hopefully it also means a new executive structure and management structure as Cycle Lab in particular must be one of the most undervalued brands in SA at present.

 

PS: Is Cycle Lab really our largest Cycling Retailer? I would think that Specialized and their concept stores would push more product in terms of units and turnover.

 

Specialized Concept stores are all individually owner managed shops, the shop in Stellenbosch is SpecializedSA's first own shop. So in terms of retailers Cycle Lab could be the largest probably.

[khm4252]

I think Cycle Lab have the biggest store but I think Chris Willemse and Solomons push more volume/turnover.  They are probably the big 3 players in the market.  Cajees probably come in next. 

 

Old Mutual's private equity bought the MoreCorp, so they are new owners (70%) and not new managers. Darryl remains a 20% shareholder and the rest of management has 10% therefore management's interests are aligned with shareholders and will be entrusted to run the business to maximixe profits (like any good business).  That does not mean no new blood may come in.  If they don't perform there will be change fast. 

 

Private Equity will pump lots of debt in the business and expect consistent cash flows to pay off debt and then issue dividends.  After +-7 years they will sell the asset or list it.  I find it most interesting that they see upside (or limited downside) to golf.  I am an avid golfer (and cyclist) and I see serious downside to golf.  The majority of players are old, white males who are a dying breed.  There is a serious lack of deiversity in golf with regards to gender, race and age groupings.  It is also a sport that takes longer to play and is more difficult to master than cycling.  I don't think it is more expensive than cycling but has the perception of being expensive due to high end course green fees. 

 

Cycling in South Africa has good potential if they can tap into the back middle class.  I don't even see 10% on-white people at KZN MTB races and African black must be below 5%.  If that number can push 20-30% in 2 years time MoreCorp will be rolling in it. 

[SAGecko]

PS: Is Cycle Lab really our largest Cycling Retailer? I would think that Specialized and their concept stores would push more product in terms of units and turnover.

 

I would have said it's not even close. Like the difference between a boutique clothing store and Mr Price.

[skipperw]

To suggest that MoreCorp aren't already rolling in it would be silly. 

[eddy]

I heard this this morning and wondered how much of Cycle lab MoreCorp bought. Was it 100% or did the CL shareholders retain a stake ?

[Dicky DQ]

see commet by 

khm4252

above

[NelAndre]

I think Cycle Lab have the biggest store but I think Chris Willemse and Solomons push more volume/turnover.  They are probably the big 3 players in the market.  Cajees probably come in next. 

 

Old Mutual's private equity bought the MoreCorp, so they are new owners (70%) and not new managers. Darryl remains a 20% shareholder and the rest of management has 10% therefore management's interests are aligned with shareholders and will be entrusted to run the business to maximixe profits (like any good business).  That does not mean no new blood may come in.  If they don't perform there will be change fast. 

 

Private Equity will pump lots of debt in the business and expect consistent cash flows to pay off debt and then issue dividends.  After +-7 years they will sell the asset or list it.  I find it most interesting that they see upside (or limited downside) to golf.  I am an avid golfer (and cyclist) and I see serious downside to golf.  The majority of players are old, white males who are a dying breed.  There is a serious lack of deiversity in golf with regards to gender, race and age groupings.  It is also a sport that takes longer to play and is more difficult to master than cycling.  I don't think it is more expensive than cycling but has the perception of being expensive due to high end course green fees. 

 

Cycling in South Africa has good potential if they can tap into the back middle class.  I don't even see 10% on-white people at KZN MTB races and African black must be below 5%.  If that number can push 20-30% in 2 years time MoreCorp will be rolling in it. 

Very insightful post.

[khm4252]

To suggest that MoreCorp aren't already rolling in it would be silly. 

 

You don't understand.  MoreCorp sold the business - historical earnings belonged to the old owners.  Old Mutual would have paid for the business based on historical earnings and forward projections.  They would have then discounted the forward earnings to present value and paid out the previous shareholders.  In all likelyhood they would have raised +-50% debt to pay them off, this needs to be paid off based on future earnings.  If the business was valued based on for example 10% growth annually then Old Mutual would have calculated a return on investment which for example could have been 25% based on a 3.2 years payback period.  If you get a step change in earnings such as a big increase in middle class black cyclists you get more revenue and thus pay back debt faster, and earn a bigger ROI or a shorter payback period.