Kogan.com Limited

KGN Details

1H21 Result Highlights: Kogan.com Limited (ASX: KGN) runs a portfolio of retail and service businesses comprising of Kogan Marketplace, Kogan Retail, Kogan Internet, Mighty Ape and a few others. It sells products under third party brands and under Kogan.com’s exclusive brands. As on 2^nd February 2021, the market capitalisation of the company stood at ~$1.82 billion. On 29^th January 2021, the company announced issue of 173k performance rights (KGNAA) under an Equity Incentive Plan for nil consideration. During the December 2020 quarter, it acquired Might Ape, a New Zealand online retailer via 100% purchase of the company’s issued capital at a price of $122.4 million.  The company provided record 1H21 result highlights on 29^th January 2021. It experienced robust business growth during the Christmas period for 10 days including Black Friday week which was record breaking. KGN has more than 3 million active customers and 719k customers from Mighty Ape till date. The Kogan Group (including Mighty Ape) posted more than 96% YoY and 120% YoY increase in gross sales and gross profit. Its adjusted EBITDA and EBITDA for 1H21 also grew by 175% and 140% respectively on pcp basis. It held cash balance of $78.9 million as on 31^st December 2020.

September 2020 Results: The company reported increase in sales by 117% YoY and 466% YoY increase in adjusted EBITDA. It had 2.46 million active customers as on 31 August 2020 with the highest addition of 152k customers in August 2020 only.

FY20 Highlights: For FY20, the company posted a revenue growth of 13.5% YoY to $497.9 million. It reported higher gross margin of 25.4% on FY19 and 54.5% rise in EBITDA at $46.5 million for FY20. Its EPS rose by 58.5% YoY from $0.18 to $0.29.

Financial Highlights, FY18-FY20 (Source: Company Reports)

Outlook: Post the acquisition of Mighty Ape, the company forecasts pre-synergies revenue of $137.7 million, gross profit at $45.7 million, and an EBITDA of $14.3 million for FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of KGN gave a negative return of 15.59% in the past three months and a negative return of 6.46% in the past six months. The stock is currently trading towards its 52-weeks’ high level of $25.57. The stock of KGN has a support level of ~$15.73 and a resistance level of ~$18.87. We have valued the stock using Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Redbubble Limited (ASX: RBL), Temple & Webster Group Limited (ASX: TPW), Wesfarmers Limited (ASX: WES) and others. Considering the current trading levels, record 1H21 results, decent FY20 performance, expanded portfolio with Mighty Ape’s acquisition, growth of its customers, decent outlook for FY21, and valuation, we give a ‘Hold’ rating on the stock at the current market price of $17.490, up by 1.039% on 2^nd February 2021.

KGN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

MyDeal.com.au Limited 

MYD Details

Q2FY21 Financial Results & Business Update: MyDeal.com.au Limited (ASX: MYD) is a provider of online retail seller and distributor of household goods. As on 1^st February 2021, the market capitalisation of the company stood at ~$317.06 million. During the quarter, MYD appointed Mr. Lachlan Freeman as the new CFO from January 2021. MYD will announce its H1FY21 results on 23 February 2021. The company recorded 165% YoY growth in gross sales to $70.1 million. This was due to 103% growth of its private label product sales to $2.8 million on Q1FY21. The company recorded 813k active customers, up 205% YoY as on 31 December 2020. The company experienced 52.7% of transactions from repeating customers, up from 38.5% in December 2020 quarter. It collected $71.5 million cash receipts from customers for Q2FY21, up by 22.4% QoQ.

Growth in Sales, 1QFY19-2FYQ21 (Source: Company Reports)

1HFY21 Growth Highlights: With the close of Q2FY21, the company reported growth in gross sales by 217% YoY to $126.7 million for 1H21. Its active customer base expanded by 205% YoY to a record 813,764 on 31 December 2020. MYD registered a cash balance of $48.1 million as on 31 December 2020.

Outlook: The company plans to launch mobile apps for iOS and Android and grow its private label product range to more than double in 2H21. The company also plans to grow staff and multiple new roles from Q3FY21 to foster growth.

Valuation Methodology: Price to Sales Multiple Based Relative Valuation (Illustrative)

Price to Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of MYD gave a positive return of 1.61% in the past one month and a positive return of 4.13% in the past three months. The stock is currently trading towards its 52-weeks’ low level of $1.15. The stock of MYD has a support level of ~$1.232 and a resistance level of ~$1.318. We have valued the stock using 1-standard deviation to average Price-to-Sales multiple (since inception) of around 8.08x for FY21E with consensus sales of $44.70 million and have arrived at a target price of lower double-digit upside (in % terms). Considering the current trading levels, record gross sales and active customers for Q1FY21 followed by decent Q2FY21 results, decent outlook for FY21, strong cash position, and valuation, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.260, up by 2.857% on 2^nd February 2021.

MYD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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