Redbubble Limited

RBL Receives Approval from US SEC for ADR Program:Redbubble Limited (ASX: RBL) owns and operates Redbubble and TeePublic, which are the leading global marketplaces for independent artists. Recently, the company announced that is has received approval from the United States Securities and Exchange Commission (SEC) to establish its sponsored Level 1 American Depositary Receipts Program (ADR).RB Group’s ADRs will trade under the symbol “RDBBY” and represent 1 ADR for every 10 ASX-traded RBL ordinary shares. The company has appointed The Bank of New York Mellon (BNYM) as the nominated depository bank.

Q1FY20 Financial Performance:During the quarter ended 30 September 2019, marketplace revenue was reported at $70 Mn, an increase of 43% over previous corresponding period. Gross profit for the period increased by 48% on pcp to $27 Mn. Gross profit margin on marketplace revenue for the period increased by 1.5 percentage points to 37.9%. Operating EBITDA improved from a loss of $0.8 Mn in Q1FY19 to a profit of $3.7 Mn in Q1FY20. EBITDA improved from a loss of $1.8 Mn in Q1FY19 to a profit of $2.2 Mn in Q1FY20. Free cash flow improved from $0.4 Mn in Q1FY19 to $7.8 Mn in Q1FY20. Cash balance as on September 30, 2019 was reported at $37.9 Mn.
 

Q1FY20 Key Metrics (Source: Company Reports)

What to Expect:The company is making good progress in areas of strategic investment that are critical to long term marketplace growth and profitability. It has on-boarded a total of 53 brands with 5 new brands added in Q1FY20. Moreover, it launched 7 new products, i.e., socks, coasters, water bottles, comforters, cotton tote bags, kids and toddler pullover hoodies in the first quarter. These developments are expected to the company’s growth in the long run.
Stock Recommendation:RBL’s share generated a positive YTD return of 60.44%. Group’s Q1FY20 top-line continues to be driven by strong growth rates from TeePublic.Revenue growth from Redbubble was in-line with the management’s expectations. The Group has delivered a strong operating leverage with 48% Gross Profit growth, outpacing the growth of 22% in expenses during the first quarter of FY20. Its gross margin for FY19 stood at 30.8%, better than the FY18 results of 29.2%. Its EBITDA margin improved from a negative margin of 3.2% in FY18 to 0.9% in FY19. On valuation front, its EV/Sales multiple (on TTM basis) stands at 1.3x, lower than the industry median of 4.7x. Considering the above factors and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $1.775, up 21.575% on October 23, 2019 on account of important announcement of Q1FY20 business update.

Kogan.com Limited

Rapid New Vertical Expansion:Kogan.com Ltd (ASX: KGN) has a range of retail and service businesses that include Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Health, Kogan Pet, Kogan Life, Kogan Money, Kogan Cars and Kogan Travel.

Key Highlights for the Quarter Ended 30 September 2019:In Q1FY20, the company launched key new verticals such as Kogan Money Super, Kogan Mobile NZ, Kogan Energy and Kogan Money Credit Cards. Each of these verticals is supported by a strong commercial partnership with a top tier incumbent provider that focuses on providing customers with a market leading offer. During the period, the company achieved 14% Y-o-Y active customer growth, with 1,653,000 customers as on September 30, 2019. Exclusive Brands revenue for the period grew by more than 35% on prior corresponding period.Kogan Mobile Active Customers grew by 14.4% Y-o-Y as at September 30, 2019. Revenue for Kogan Mobile during Q1FY20 grew by more than 20%, as compared to Q1FY19. Kogan Internet Active Customers grew at a rate of 347.5% Y-o-Y. Kogan Insurance revenue during Q1FY20 grew by more than 20% on Q1FY19. The company’s cash balance as on 30 September 2019 was reported at $7.2 Mn, with no bank debt.


Kogan Marketplace Gross Sales (Source: Company Reports)

What to Expect:During the September’19 quarter, the company entered into an agreement with Corporate Travel Management Limited, that will expand its service offerings for FY20.Some of the offerings under the agreement will include Kogan Travel branded travel services, including flights, cars and holiday packages.

Stock Recommendation:KGN’s share generated a positive YTD return of 99.71%. Company’s unaudited gross sales for the September Quarter grew by more than 16% on the previous corresponding period. Its gross profit grew by more than 28% on pcp. Its gross margin, EBITDA margin and net margin for FY19 stood at 20.7%, 7.0% and 3.9%, better than the FY18 result of 19.5%, 6.1% and 3.4%, respectively, implying decent fundamentals of the company. Given the aforesaid factors along with price movement in the recent past, we recommend a “Hold” rating on the stock at the current market price of $7.040, up 1.004% on 23 October 2019.
 

Kathmandu Holdings Limited

Oboz Ownership Delivering Positive Result:Kathmandu Holdings Limited (ASX: KMD) recognizes revenue from the sale of footwear, clothing and equipment for travel and adventure. On 23 October 2019, the company informed the market that it has successfully completed the retail entitlement offer component of its fully underwritten 1 for 4 pro-rata accelerated entitlement offer of new fully paid ordinary shares in the company, to raise a total NZ$145 Mn.The offer closed on 21 October 2019 and raised gross proceeds of ~NZ$18.5 Mn. The new shares are expected to commence trading on NZX Main Board and ASX on 29 October 2019.

FY19 Key Highlights for the Period Ended 30 June 2019:Group Sales for the period increased by 9.7% to NZ$545.6 Mn, mainly due to the impact of Oboz ownership. Oboz sales increased by 30%, and EBIT increased by 38.6% on a pro forma basis, enabling the company to diversify its channels, brands, products and geographical presence.

Group’s gross profit increased by NZ$17 Mn, mainly due to increase in contribution from North American wholesale segment. Net profit after tax for the period increased by 13.6% to NZ$57.6 Mn. The Board of Directors declared a final dividend of NZD 12 cents per share, with record date and payment date on 30 September 2019 and 11 October 2019, respectively.


FY19 Key Metrics (Source: Company Reports)

What to Expect:As per the release, the company is planning to invest in innovation to deliver unique and disruptive solutions for world adventurers. It also expects to introduce capability to create and test women’s apparel on an accelerated timeline. To enable future store optimisation, the company aims toimplement merchandise planning and warehouse management systems across its retail stores.

Stock Recommendation:KMD’s share generated a positive YTD return of 18.06%. The securities of the company have been placed in a trading halt at the request of KMD, owing to the pending release of an announcement related to Retail Entitlement Offer. The halt will remain until the earlier of the commencement of normal trading on 25 October 2019 or when the announcement is released to the market. Its gross margin, EBITDA margin and net margin for FY19 stood at 60.9%, 18.4% and 10.6%, better than the industry median of 24.2%, 6.9% and 3.4%, respectively, implying decent fundamentals of the company. Its current ratio for FY19 stood at 1.83x, better than the industry median of 1.26x, which implies that the company is in a better position to address its short-term obligations.Hence, considering the potential from North American market, following Oboz ownership, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $3.00.

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.