Kathmandu Holdings Limited
 

Oboz Delivers Strong Growth: Kathmandu Holdings Limited (ASX: KMD) is engaged in the design, marketing and retail of clothing and equipment for outdoor, travel and adventure.

Trading Update: The company recently released a trading update for financial results for the year ended 31 July 2019. As per the unaudited results of FY19, the company expects to report total sales amounting to NZ$545 million for the year, up 9.6% on prior year. Normalised EBIT for the year is expected to be in the range of NZ$82.5 million to NZ$84.0 million, as compared to NZ$74.6 million in FY18. The company expects to report normalised NPAT for the year in the range of NZ$55.5 million and NZ$57.0 million, as compared to prior year value of NZ$50.5 million. Group same store sales are expected to witness a growth of 0.6% at constant exchange rates with same store sales growth of 2.7% in Australia and a decline of 3.9% in New Zealand.

Appointment of Director: Andrea Martens was recently appointed as an independent director on the company’s Board.

1HFY19 Results: During the first half, the company reported sales amounting to NZ$232.0 million, up 13.3% on prior corresponding period. Gross profit for the period was reported at NZ$141.9 million, up 9.4% on pcp. Reported EBIT for the period stood at NZ$20.9 million and reported NPAT was reported at NZ$14.0 million. The company paid an interim dividend of NZ$4.0 cents per share on 07 June 2019.


Group Results Summary (Source: Company Reports)

Sales Performance by Businesses: Total sales in Australia grew at a rate of 2.7%. Sales in New Zealand witnessed a decline of 1.9%. The company continued to deliver strong growth for the Oboz business, with sales increasing at a rate of 38.6%. EBIT for the period stood at NZ$4.7 million, up 77.1% on prior corresponding period EBIT of NZ$2.7 million.


Oboz Performance (Source: Company Reports)

Stock Recommendation: The stock of the company generated negative returns of 3.79% and 2.87% over a period of 1 month and 3 months, respectively. The company reported strong performance in the second half of FY19 with conditions in New Zealand remaining a challenge to the business. Sales and EBIT for Oboz business continued to deliver strong growth and is expected to continue the trend in FY2020 and beyond. According to the trading update, the company is expecting a decent increase across all FY19 key metrics including sales, EBIT and NPAT on the prior year. Considering the above factors, we give a “Buy” recommendation on the stock at the current market price of $2.320, up 14.286% on 08 August 2019.
 

Kogan.com Limited

Strong Growth in Exclusive Brands: Kogan.com Limited (ASX: KGN) provides its products and services through various platforms including Kogan Internet, Kogan Retail, Kogan Mobile, Kogan Marketplace, Kogan Travel and Kogan Insurance. The company recently updated that it will release FY19 financial results on 20 August 2019.

Change in Shareholding: As per a recent announcement to the exchange, the company updated that the voting power of Challenger Limited increased from 6.45% to 7.65%. Voting power of another shareholder, Greencape Capital Pty Ltd increased from 6.37% to 7.65%. Credit Suisse Holdings (Australia) Limited saw a fall in the voting power from 7.19% to 6.12%.

Business Update: Based on the unaudited management accounts, the company reported a year-on-year active customer growth of 15.9% for Kogan.com. As at 30 June 2019, the company had 1,609,000 active customers, as compared to 1,388,000 customers as at 30 June 2018. Active customer for Kogan Mobile witnessed an increase of 24.4% year-on-year. In 2HFY19, Kogan Mobile’s commission-based revenue reported a growth of more than 5% as compared to the prior corresponding period. Kogan Internet reported a growth of 273% in active customers year-on-year owing to another strong quarter of promotional activity. Commission based revenues for Kogan Insurance witnessed a rise of more than 100%. Launched in the third quarter, Kogan Marketplace also reported good performance with respect to Gross Transaction Values as depicted by the graph below.


Kogan Marketplace GTV (Source: Company Reports)
 
Gross Transaction Value for 2HFY19 reported a growth of more than 9% on the prior corresponding period. Gross profit during the period grew more than 12% as compared to pcp and EBITDA growth was reported by more than 25%. As at 30 June 2019, the company had a cash balance of $27.5 million.

Stock Recommendation: The stock of the company generated negative returns of 4.85% and 15.37% over a period of 1 month and 3 months, respectively. During Q4FY19, the company reported strong growth in Exclusive Brands with revenues in 2HFY19 growing more than 30% in comparison to 2HFY18. The period also saw the expansion of its logistics footprint to 13 fulfillment centres to provide better customer experience. In addition, the company has a pipeline of new business units that will further enhance the customer experience. New verticals planned to be launched in 1HFY20, include Kogan Mobile NZ, Kogan Super, Kogan Credit Cards and Kogan Cars, along with a new partnership to launch Kogan Energy in 1HFY20. Hence, considering the aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of $5.000, up 2.041% on 08 August 2019.

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