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"Mercadolibre" hosts largest online trading platform in Latin America focused on enabling e-commerce and its related activities.
Company was incorporated in 1999 and introduced websites in Argentina, Brazil, Mexico, Colombia, Uruguay, Venezuela, Chile and Ecuador by December 2000.
In 2004 company entered Peru.
In 2005 company acquired certain operation of Deremate.com, Inc.
In 2006 company launch its websites in Coast Rica, Dominica Republic and Panama.
Serviced offered
Company offer its users two principal services:
The MercadoLibre marketplace: The MercadoLibre marketplace is a fully-automated, topically-arranged and user-friendly online trading service. This service permits both businesses and individuals to list items and conduct their sales and purchases online in either a fixed-price or auction-based format. Additionally, through online classified advertisements, registered users can also list and purchase motor vehicles, vessels, aircraft, real estate and services.
The MercadoPago online payments solution: It is integrated online payments solution. MercadoPago is designed to facilitate transactions on the MercadoLibre marketplace by providing a mechanism that allows its users to securely, easily and promptly send and receive payments online.
Revenue
Company generate revenues from the MercadoLibre marketplace segment through:
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Listing fees;
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Optional feature fees;
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Final value fees;
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Online advertising.
MercadoPago revenues is attributable to commissions charged to buyers for the use of MercadoPago
Growth
Company's gross merchandise has shown significant growth from $21.3 million in FY 2001 to $ 1075.1 million in FY 2006 and further to $312.5 million in Q1 FY 2007.
Growth in gross merchandise volumes
|
Gross Merchandise Volume ($ in million)
|
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Year ended December 31, |
Quarter ended Mar 31, |
| |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2006 |
2007 |
|
Gross Merchandise Volume
|
$21.3 |
$55.4 |
$164.3 |
$299.3 |
$607.7 |
$1,075.1 |
$217.8 |
$312.5 |
Operational growth
On operational front company has shown all-round growth. (in million)
| |
Year ended December 31, |
Quarter ended Mar 31, |
| |
2002 |
2003 |
2004 |
2005 |
2006 |
% ch
|
2006 |
2007 |
% ch |
|
Number of confirmed registered users at end of period.
|
2.5 |
4 |
6.5 |
12.2 |
18.2 |
49.18% |
13.5 |
19.7 |
45.93% |
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Number of confirmed new registered users during period.
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1.3 |
1.5 |
2.5 |
5.7 |
6 |
5.26% |
1.3 |
1.6 |
23.08% |
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Gross merchandise volume.
|
55.4 |
164 |
299.3 |
608 |
1,075.10 |
76.91%
|
218 |
313 |
43.48% |
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Number of successful items sold.
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1.4 |
3.1 |
5.1 |
8.4 |
13.8 |
64.29%
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2.8 |
3.9 |
39.29% |
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Total payment volume.
|
— |
0.1 |
8.9 |
38.5 |
89 |
131.17%
|
16.5 |
26.6 |
61.21% |
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Capital expenditures.
|
0.5 |
0.9 |
2.1 |
2 |
2.4 |
20.00%
|
0.6 |
0.6 |
0.00% |
|
Depreciation and amortization.
|
0.6 |
0.8 |
1.1 |
1.6 |
2 |
25.00%
|
0.5 |
0.5 |
0.00% |
Customers/Industries served
Anyone with internet access and intention to sell/buy something is company's customer or potential customer.
Market opportunity
Country wise/ area wise performance of company
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Year ended December 31, 2006 (in millions)
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Country
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Gross Merchandise Volume |
Successful items sold |
Confirmed new registered users |
Unique sellers |
Unique buyers |
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Argentina
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159.7
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2.5 |
0.9 |
0.3 |
0.7 |
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Brazil
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562.6 |
7.4 |
2.8 |
0.7 |
2.3 |
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Mexico
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154.1 |
1.8 |
0.9 |
0.2 |
0.6 |
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Other
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198.6 |
2.2 |
1.4 |
0.4 |
0.8 |
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Total
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1,075.10 |
13.8 |
6 |
1.7 |
4.4 |
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Quarter ended March 31, 2007 (in millions)
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| Country |
Gross Merchandise Volume |
Successful items sold |
Confirmed new registered users |
Unique sellers |
Unique buyers |
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Argentina
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45
|
0.7
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0.2
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0.1
|
0.3
|
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Brazil
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152.2
|
2.1
|
0.7
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0.2
|
0.9
|
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Mexico
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46.5
|
0.6
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0.2
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0.1
|
0.2
|
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Other
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68.9
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0.6
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0.4
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0.2
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0.3
|
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Total
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312.5
|
3.9
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1.6
|
0.6
|
1.7
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Percentage of consolidated net revenues by country from MercadoLibre marketplace:
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Year ended December 31,
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Quarter ended Mar 31,
|
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Country
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2004
|
2005
|
2006
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2006
|
2007
|
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Brazil
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60.20%
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61.20%
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57.20%
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60.80%
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54.20%
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Argentina
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22.3
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18.7
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15.7
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13.8
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15.6
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Mexico
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8.8
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11.1
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13.9
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14.1
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15.4
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Other
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8.7
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9
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13.3
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11.3
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14.8
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Brazil is the biggest market for company followed by Argentina and Mexico. In % term currently brazil is losing its share in company's revenue mainly because of entry of company in new markets and also due to increase contribution from Argentina and other establish markets but Brazil will continue to play major role in company's revenues and in long term Brazil is expected to provide major growth to company due to rise in internet penetration which currently is less than 18% as compare to 34% in Argentina.
Although all markets are expected to grow at rapid pace but Brazil, Argentina and Mexico will remain major markets for company due to their size.
Competition
The market for trading over the Internet is rapidly evolving and highly competitive. Competitors include various online sales and auction services, business-to-consumer online e-commerce services, shopping comparison sites, large online communities and services
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DeRemate in Chile and Argentina,
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MasOportunidades.com in Argentina
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Number of other small services, including those that serve specialty markets.
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B2W in Brazil.
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Buscape and Bondfaro, located throughout Latin America.
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Google, Amazon.com, Microsoft and Yahoo! currently offer a variety of online services, and certain of these companies may introduce online trading to their large user populations.
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Company's strategic alliance with eBay expired on September 24, 2006. Even though eBay is one of company's stockholders, with the termination of agreement, there are no contractual restrictions upon eBay becoming one of it's competitors.
Company's Strength
Strong brand name
Vast reach :- Company currently is operating and generating revenue from nearly twelve countries which will isolate company from any country specific slowdown or failure.
Establish customer base :- As on quarter ended March 31, 2007 company has nearly 19.7 million register users.
Range of services :- Company provides a fully developed online trading platform and also provides online payment solutions.
Earlier starter :- Company is an early starter in a rapidly growing market.
Offer & Objects of issue
For Offer & Objects of issue Click here......
Industry details and outlook
For Industry details/outlook Click here......
Company Outlook
Company outlook is positive due to;
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Rapidly growing market.
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Rising awareness.
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Its multilateral reach.
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Vast range of product offering integrated with online payment solutions.
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Existing customer/user base.
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Strong brand name.
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Past growth shown by the company.
Financials ($ in million)
Company's financial year ends on December 31.
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FY 2004
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FY 2005 |
FY 2006 |
Q1 FY 2006* |
Q1 FY 2007* |
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Total net revenues
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12.7 |
28.5 |
52.1 |
11 |
16.5 |
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Gross profit
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10.2
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22.1 |
40 |
8.5 |
12.9 |
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Income from operations
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(3.3)
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.8 |
5.4 |
.8 |
2.9 |
*Quarter ended March 31
For FY 2006, approximately 85.9% revenues were attributable to MercadoLibre marketplace listing, optional feature, final value and advertisement fees. The remaining 14.1% of revenues were attributable to MercadoPago fees.
For the three months ended March 31, 2007, approximately 86.2% revenues were attributable to MercadoLibre marketplace listing, optional feature, final value and advertisement fees. The remaining 13.8% of revenues were attributable to MercadoPago fees.
On expenditure side company spends nearly 20% of its revenue on online advertising to attract new visitors/users on it's online market place.
Cash flows are just sufficient to meet current needs.
Valuation/Offer value ($ In million)
At offer price of $17 per share, company's shares are available at PE of nearly 99 ( Annualizing Q1 2007 operating profit and deducting Tax @35%).
THESE ARE JUST ASSUMPTIONS
| Q1 FY 2007 profit |
Annualized |
Tax @ 35
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Net |
EPS* |
PE** |
| $ 2.9 million |
2.9.*4 = 11.6 |
4.06 |
7.55 |
.17 |
99 |
*At $ 17 per share
** Outstanding shares 43,835,263
Company is a early starter in a very rapidly growing markets and has a strong brand name with rapidly rising user base. Growth in market is expected to continue in foreseeable future due to rising penetration of internet and rising awareness about computers and online trading. Along with online trading platform company has also developed a online payment system which itself offer a huge growth opportunity.
All in all market is rising and is rising very rapidly and there is no doubt that it will continue to rise in future also. Although the competition is expected to rise and entry barriers are low. It's upto the company's management that how it handle rising competition in opportunistic business environment because some potential competitors are much bigger than company.
Negatives
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Competition is rising.
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Cash flows are not strong.
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Company is loss making in it's many territories.
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Any company specific failure or inability of company to capitalize on future opportunities.
Positives
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Rapid market growth
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Rising awareness.
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Past growth of company.
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Complete range of online trading services including online payment solutions
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Existing user base.
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Strong brand name.
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Its existing relationship with various customers.
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Its multilateral reach.
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Knowledge of local markets.
This article reflects personal view of the author about the company and one must read offer prospectus and consult its financial adviser before making any investment decision
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