Kogan.com Ltd

KGN Details

FY21 Performance Update: Kogan.com Ltd (ASX: KGN) is engaged in the retail and services businesses and includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Travel, to name a few in its portfolio. The Group has recently updated about its FY21 performance.

• Gross sales grew by 7% to $1.179 billion in FY21, compared to FY19.
• NPAT stood at $3.5 million with eps of $0.03 per share, and adjusted NPAT was at $42.9 million in FY21.
• The company ended the year with a net cash position of $12.8 million.
• Active customers grew by 46.9% to 3,207,000 as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: COVID-19 has impacted the company's operations, and it had to incur additional logistics costs due to it. The risk of the pandemic still prevails with the uncertainty of further lockdowns.

Outlook: In view of its growth plans, the company has decided to conserve cash for investment initiatives and has decided to pause on dividends. Going forward, it expects growth in its marketplace revenue and brands. It also anticipates the synergy of Mighty Ape's team and operations into its business.

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: As per ASX, the stock of KGN is trading below its average 52-weeks’ levels of $8.70-$25.570. The stock of KGN gave a negative return of ~47.85% in the past one year and a positive return of ~10.16% in the past three months. It has a support level of $8.70 and a resistance level of $11.57. 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 (in percentage terms). The company might trade at some discount to its peers’ median, considering the decrease in net margin performance and the impact of COVID-19 on its operations. For the purpose of valuation, few peers like Temple & Webster Group Ltd (ASX: TPW), Redbubble Ltd (ASX: RBL), Booktopia Group Ltd (ASX: BKG) have been considered. Considering the expected upside in valuation & current trading levels, increase in gross sales, substantial growth in active customers, decent net cash position and the key risk associated with the business, we recommend a ‘Hold’ rating on the stock at the current market price of $10.80, down by 2.351% as on 25 August 2021.

KGN 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.

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