Betterware de Mexico: Entering The U.S. Market On Solid Footing

Investment Thesis - The company has shown resilience by paying dividends for seventeen consecutive quarters despite pandemic-induced volatility since going public via SPAC in March 2020 [1] - Current share price offers an attractive valuation with an 8% dividend yield and an EV to 2024 EBITDA multiple below 5, with potential growth from entering the US market [2] Company Overview - Betterware de Mexico (NASDAQ:BWMX) operates a capital-light direct-to-consumer model selling household items primarily through multi-level marketing and its own website [3] - The acquisition of Jafra in April 2022 has significantly impacted revenue, with Jafra contributing 57% and Betterware 43% to consolidated revenue for FY2023 [4] Financial Review - The company experienced a robust revenue growth of nearly 13% in FY2023 after navigating challenges in 2022, with gross margins reaching 74% in Q1 2024 [8] - Management's guidance for FY2024 anticipates revenue growth of 8% and EBITDA growth of 11%, indicating strong operating leverage [9][11] - The company has reduced its net debt to TTM EBITDA ratio from 2.6 to 1.78, with a focus on debt repayment following the acquisition of Jafra [12] Valuation - BWMX is projected to deliver approximately $180 million in EBITDA for 2024, with a free cash flow estimate of $125 million, indicating a 70% conversion from EBITDA [13] - The company trades at significant discounts compared to peers in the direct-to-consumer space, with EV to 2024 EBITDA ratios of 4.8 compared to 9.4 for Newell Brands and 17.7 for The Container Store Group [14][15] US Market Entry - The company officially entered the US market, leveraging Jafra's existing presence, with plans to target the substantial Hispanic population in the US [16][17] - The Hispanic population in the US generates a GDP twice that of Mexico's, presenting a significant growth opportunity for the company [18]