How long have you held the stock?
We bought Baby Bunting (BBN) through its IPO – about a year ago.
 What do you like about it?
BBN has a simple business model that is easy to understand. We generally like roll-out opportunities, as their predictability of earnings makes it easy for us to get visibility on earnings going forward.
How is it better than its competitors?
BBN has a consistent store format and extensive product offerings that are supported by highly knowledgeable staff, who seem leagues above their competitors. In addition, the baby retail segment of the market is highly fragmented, with BBN being the largest operator with 36 stores. The scale of BBN provides for significant opportunities including value through economies of scale.
This year, BBN’s major competitor, MyBabyWarehouse collapsed, further strengthening BBN’s market position.
What do you like about its management?
BBN has a highly reputable management team that has extensive retailing experience. BBN has been led by the retail King, Chairman Barry Saunders for over eight years and he has been instrumental in building out a quality and experienced management team including MD/CEO Matt Spencer.
What is your target price on BBN?
We do not set price targets at ECP. We forecast dividends, earnings and a terminal PE multiple over our investment horizon. The share price then dictates whether we buy or sell depending on its weight relative to our other investments.
At what point would you sell it?
When the Internal Rate of Return (IRR) falls below our threshold – this is the discounted risk-free rate plus a risk premium.
How much has it added (subtracted) to your overall portfolio over the last 12 months?
FYTD has seen BBN return over 30%. BBN is currently a smaller position in our portfolio due to its high valuation and has contributed around 0.4% to the portfolio return.
Is it a liquid stock?
BBN is reasonably liquid.
Where do you see the value?
The value in BBN is that it is a simple business model run by a strong management team, which has been able to successfully roll out its store footprint over time.
Source: Yahoo!7 Finance
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