Hypebeast Limited (0150.HK) – A profitable growth stock on the cutting edge of the latest fashion trends



According to Merriam Webster, the word, Hypebeast, generally refers to a person who is dedicated to acquiring trendy items, especially luxury clothes and shoes. Typically, they will carry a mix of streetwear names such as Supreme, Off-white, Antisocial Social Club and Bape.

In a 2019 article by Strategy&, he mentioned that streetwear has become one of the most striking retail and fashion trends in recent years. Consumers have often rallied through social media to be the first to buy products from a particular brand, either in-store or online. The anticipation of a limited-time shopping opportunity helps create a close, almost cult-like relationship between streetwear brands and their consumers.

Source: Strategy&

This helped transform streetwear from an eye-catching fashion phenomenon into a multi-billion dollar retail market today. A company that stands at the forefront of this trend would be Hypebeast Limited (0150.HK).

From a sneaker blog to a publicly traded digital media empire

Hypebeast was founded by Mr. Kevin Ma Pak Wing in 2005, which first started as a sneaker blog. In 2016, Hypebeast was listed on HKEX’s secondary board, Growth Enterprise Market (GEM), and later transferred its listing status to HKEX’s parent board in 2019.

Currently, Ma is the largest shareholder of the company (73.70% stake) and serves as the Executive Chairman and CEO of Hypebeast.

What began as a personal passion project, Hypebeast has since evolved into a digital media and e-commerce group on the cutting edge of fashion and culture. The group comprises three major divisions:

  • HYPEMEDIA (Online editorial and social media platform)
  • HBX (e-commerce platform and offline store)
  • HYPEMAKER (In-house creative production agency)

Achieved awards, cooperation with Avex Entertainment

Hypebeast was named one of “Asia’s Top 200 Under $1 Billion Companies” by Forbes in 2018 and one of “Most Innovative Companies” by Fast Company in 2017. In a maintenance with Forbes in 2018, Ma emphasized that her ultimate goal is to create a brand that lasts beyond her lifetime and that people still gravitate towards 100 years from now.

Kudos to his visionary thinking, Ma has since led Hypebeast to a series of accomplishments. One of them would be Partnership with Avex Entertainment in September 2020.

Founded in 1988, Avex is Japan’s largest entertainment company, with businesses spanning talent management, live event hosting, and music/video streaming subscription services.

Through this partnership, Hypebeast aims to further grow its business segment in Japan with the support of Avex’s strong domestic connection, extensive network of influencers and power in content distribution to propel Hypebeast Japan into the next phase of growth and help Hypebeast penetrate the Japanese market.

With this, Avex became a long-term strategic partner with Hypebeast. In addition, to consolidate this partnership, Avex has agreed to subscribe for a total of 6.53 million shares at a subscription price of HKD 1.05 per share, representing a premium of approximately 14% over the closing price of HKD 0.92 at that time. the agreement.

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Active on social media with a long list of major clients

Hypebeast reached a monthly pageview of 50 million, with 15.6 million belonging to monthly unique visitors. Their 26.2 million social media followers are also at the top of the industry. This shows the attractiveness and influence of Hypebeast in the industry.

Source: Hypebeast

With such an extensive reach and huge amount of pageviews monthly, Hypebeast has managed to attract a long list of major clients, as seen below. From the list, we can see that Hypebeast’s customers come from different industries, from luxury fashion houses like Louis Vuitton and Gucci to automotive brands like Lexus and Infiniti. These clients will work with Hypebeast using their digital marketing channels to promote their products/services, hoping to capture a wider range of fashion-conscious audiences.

Source: Hypebeast

Record results for 1H FY2022

In the latest 1H2021/2022 earnings, Hypebeast achieved record financial performance, with revenue growing 55% year-over-year to HKD441 million. Its gross and net profit margin shows a significant improvement. In particular, its net profit margin doubled to 14% in the last reporting period. This shows that robust growth is boosting Hypebeast’s bottom line.

Despite the strong performance, we should note that its HY 2022 performance growth is partly benefiting from a weak base effect, as its HY 2020/2021 results declined due to the COVID-19 pandemic.

Nevertheless, comparing the numbers with the pre-pandemic period (1H 2019/2020), Hypebeast managed to perform better than ever, which shows that the company ignored the effects of the pandemic and is back on its way to growth.

Source: Hypebeast

On the other hand, its e-commerce platform, HBX, continues to see its gross margin increase even though revenue remained flat. The higher gross margin was attributed to the higher average unit value and order value during the year. Hypebeast mentioned that this trend was due to customers’ willingness to spend on high-quality products.

Source: Hypebeast

Attractive valuation with decent growth prospects

Hypebeast has grown by leaps and bounds over the years, growing from a simple sneaker blog to a Hong Kong-listed company now worth HKD1.6 billion (S$280 million) in market capitalization.

Without a doubt, Ma is an influential figure within Hypebeast as he brings his idea and philosophy to the company and pushes Hypebeast to greater heights. On top of that, Ma’s majority stake in Hypebeast shows that his interests are aligned with those of other shareholders.

Moreover, the partnership with Avex Entertainment is just one example that shows its ability to guide the company to expand into a new market to ensure future growth. With all of these initiatives in place, it’s not hard to imagine the amount of growth it has in the medium to long term.

At the time of writing, Hypebeast’s share price stood at HKD 0.80, which is down 27% year-to-date. There is no doubt that its share price performance is affected by the broader market decline, which also allows Hypebeast stock to be more attractive in terms of valuation, with a price/earnings ratio below 15 times. With decent financial performance and growth prospects at hand, this could very well be a growth meter for investors to keep on their watch list.

Source: Google Finance

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