Hepsiburada - November, the Legendary

September quarter financials and November, the Legendary. November is legendary because it marks the start of the high season at Hepsiburada. The sales and marketing teams are busy promoting while the management is upbeat about this year's November. We say that the consensus estimates for Hepsiburada's September quarter are probably too low again, even after the recent upgrades. We would expect the company to surprise to the upside. There are three other reasons why we think that way. First, we see significant pent-up demand in discretionary lines which has started resurfacing gradually following the presidential election. We expect more to show up in the September quarter sales. Second, the company has beaten estimates three quarters in a row; and we give the benefit of doubt to the company as opposed to the analysts. Third, the new management appears lean and focused. The team is committed to profitability and there are certainly early signs that the company is moving in the right direction.

Internet and eComm have bottomed out, better quarters ahead. Following two tough years in the industry, e-tailers and online marketplaces are finally showing signs of recovery. Hepsiburada has reported progressively better results since the start of the year. MercadoLibre, Allegro have also reported strong results ahead of estimates in the first two quarters of the year while the Chinese mega-tech and internet companies have reported decent numbers for the June quarter comfortably beating their respective March numbers. The September quarter financials are work in progress in the industry with some out others awaiting. Amazon's September accounts do show Amazon is not all about AWS. There is indeed marked improvement in Amazon's business outside AWS both in North America and across international e-commerce marketplace. We would expect the September performance once all out to further confirm that the marketplaces have benefited from an uptick in the usage of social media, digital advertising growth, acceleration in the adoption of online payment methods and expanding online delivery modes.

Corporate activity in the industry to boost the interest in and the equity value of Hepsiburada. Alibaba Group is on record planning to list Cainiao, its logistics arm. Cainiao has already selected Citigroup (C.N), Citic Securities, and JPMorgan to be the joint sponsors of its IPO. There is no final word on the timing and other logistics of the IPO. We reckon this particular offering, if it did take place, would create fresh interest in consumer businesses particularly in Turkey, both online and offline, because of Alibaba's presence in the country.

Hepsiburada trading at compelling valuation comps. Hepsiburada is one of the best stocks to own in the space for all the good reasons. The company has turned profitable for the first time since its IPO. Gross margins continue trending up and the expenses are better managed. Earnings should follow suit. These are good entry levels one can build sizable positions from. We display the updated comps below. Please review them and let us know what you think. Drop us a line if you wish to discuss further.