Kogan.Com Ltd

KGN Details

Ceasing to Become a Substantial Holder: Kogan.Com Ltd (ASX: KGN) operates a portfolio of retail and services businesses which mainly includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, etc. On 28 January 2022, Pinnacle Investment Management Group Limited and its subsidiaries have ceased to become a substantial holder in the company.

1HFY22 Highlights:

• During 1HFY22, the company witnessed a growth of 9% in gross sales to $698.0 million on a YoY basis, supported by accelerating Kogan Marketplace, loyalty program Kogan First, as well as Kogan Energy and Kogan Mobile New Zealand.
• KGN recorded growth in active customers to over 4,000,000. It witnessed a rise of 10% in Kogan.com active customers to 3,314,000.
• As on 31 December 2021, KGN had a strong capital position, evident by the net cash of $39.7 million.

Gross Sales Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s business could be affected by disruptions in the demand and supply, which could ultimately impact its top line and bottom line. KGN’s operational and financial performance could be impacted by the changing sentiments of consumers, which may affect its market share.

Outlook: For FY22, KGN expects growth in Kogan First memberships, whereby the company is aiming for a medium-term goal of 1 million members. In addition, KGN would be focused on the integration of the Mighty Ape team and operations in FY22. The company has scheduled to release 1HFY22 results on 25 February 2022.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of KGN has been corrected by ~24.39% and ~31.98% in the past one and three months, respectively. The stock is currently trading below its 52-week low-high average of $5.770 - $17.780, respectively.  The stock has been valued using a P/E multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average P/E multiple, considering the COVID-19 disruptions and high debt to equity ratio, etc. For this purpose of valuation, few peers like Booktopia Group Limited (ASX: BKG), Temple & Webster Group Ltd (ASX: TPW), Adore Beauty Group Ltd (ASX: ABY), and others have been considered. Considering the expected upside in valuation, growing customer base, rising gross sales and customers, decent outlook, current trading level and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $6.120, as on 15 February 2022, 10:30 AM, (GMT+10), Sydney, Eastern Australia.

KGN Daily Technical Chart, Data Source: REFINITIV

Redbubble Limited

RBL Details

Ceasing to be Substantial Holder: Redbubble Limited (ASX: RBL) operates a creative online marketplace for print on demand products. Recently, Morgan Stanley and its subsidiaries has ceased to be a substantial holder in the company.

1HFY22 Business Update:

• During 1HFY22, the company recorded marketplace revenue of $288 million, reflecting growth of 60% since 1HFY20. Gross Transaction Value (GTV) for the period amounted to $381 million.
• Gross profit for 1HFY22 fell by 25% to $108 million, and the company had a cash balance of $143 million as on 31 December 2021, reflecting a growth of 10% on a YoY basis.

Cash Balance (Source: Analysis by Kalkine Group)

Key Risks: The company’s business could be affected by macroeconomic risks, which may impact consumers demand in relevant retail markets. RBL’s operational and financial performance could be impacted by the rising market share of its peers in the industry in which it operates.

Outlook: Looking forward, RBL will be continuing near term investments by utilising existing cash reserves to enable future growth. The company expects FY22 Marketplace Revenue to be slightly below FY21 underlying Marketplace Revenue. The company is committed to its medium-term aspirations to grow GTV to over $1.5 billion. The company has scheduled to release 1HFY22 results on 16 February 2022.

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of RBL has been corrected by ~42.68% and ~54.82% in the past one and three months, respectively. The stock is currently trading near to its 52-week low level of $1.615, offering a decent opportunity for accumulation.  The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering the COVID-19 Uncertainties and inefficiency in generating profits. For this purpose of valuation, few peers like Temple & Webster Group Ltd (ASX: TPW), Kogan.com Ltd (ASX: KGN), and Adore Beauty Group Ltd (ASX: ABY) have been considered. Considering the expected upside in valuation, growing cash position, optimistic outlook, current trading level and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.625, as on 15 February 2022, 10:30 AM, (GMT+10), Sydney, Eastern Australia.

RBL Daily Technical Chart, Data Source: REFINITIV

Noumi Limited

NOU Details

Q2FY22 Operational and Financial Highlights: Noumi Limited (ASX: NOU) is involved in sourcing, manufacturing, selling, marketing and distribution of specialty plant and dairy beverages and nutritional products. 

• During Q2FY22, the company experienced decent improvements in continuing segments and a return to positive cashflow from operating activities for the quarter. The company posted an operating cashflow of $5.8 million, which includes restructuring costs of $1.9 million and prepaid insurance premiums of $1.1 million.
• The company witnessed a growth of 10.7% in revenue to $142.7 million on a QoQ basis. The total revenue was comprised of $97.0 million from dairy and nutritional, $43.8 million from plant-based beverage and $1.9 million from specialty seafood.
• At the end of the quarter, the company had a cash balance of $16.3 million, which is in line with internal forecasts.

Cash Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is currently experiencing cost pressure such as rising domestic and international transport costs and increases in raw material pricing caused by COVID-19. In addition, the business is also exposed to risks arising from disruptions in demand and supply.

Outlook: The company is focused on managing the impact of the cost pressures on its cashflow in the near future. In addition, NOU anticipates 1HFY22 earnings to be below 1HFY21 but expects a modest positive adjusted operating EBITDA from continuing operations in 1HFY22.

Stock Recommendation: The stock of NOU is trading below its 52-week low-high average of $0.180 - $0.780, respectively. The stock has been corrected by ~20.27% in the past one month. On a TTM basis, the stock has an EV/Sales multiple of 0.9x against the industry average (Food & Tobacco) of 14.9x. Thus, it can be said that the stock is undervalued at the current trading levels. Considering the valuation on a TTM basis, growing revenue, rising margins, decent liquidity position, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.295, as on 15 February 2022, 10:30 AM, (GMT+10), Sydney, Eastern Australia.

NOU Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

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