Upside in Surfstitch if management can execute strategy

We have added Surfstitch (SRF:ASX) to both Growth 1 and Growth 2. SRF is a recent listing and the largest pure play online retailer in the niche area of Action Sports, with a dominant position in Australia/NZ and established platforms in Europe and the US. Its prevailing male client base, niche offering, global reach and expertise in online from running BBG and Quicksilver’s website for five years make it a compelling story. SRF’s result beat the companies positively revised forecast and was well ahead of prospectus. Guidance was for 30-50% revenue growth and with $40.9m of cash we expect further acquisitions as SRF builds out its position. SRF is aiming to improve its margins to close to 10%, currently 4% and if this can be achieved whilst revenue grows, then $400m of revenue and $40m EBITDA is possible in 2-3 years. Therefore, considerable upside exists at current prices for investors who back management to execute on this plan.