Kogan.com Limited

KGN Details

Latest Updates: Kogan.com Limited (ASX: KGN) runs a portfolio of retail and service businesses comprising Kogan Retail, Kogan Insurance, Kogan Travel, Kogan Mobile, Kogan Internet, Kogan Marketplace, etc.

• New Insurance Agreement with QBE KGN Australia Pty Limited has signed a long-term contract with QBE Insurance (Australia) Limited (QBE). QBE will underwrite and issue motor, home, and CTP insurance products, and KGN will earn a commission on the sales of each insurance policy. KGN expects to introduce new insurance offerings under the Kogan Insurance brand in alliance with QBE in CY22.
• KGN issued ~885 shares on 6 April 2022 per the employee incentive plan (EIP) and applied for listing the share on that date.
• On 6 April 2022, KGN issued ~404,143 performance rights under an employee incentive scheme.

Financial Results of 1HFY22 (ended 31 December 2021):

• KGN has been investing significantly in the Kogan First loyalty program in marketing and technology to scale the platform, affecting EBITDA, operating costs, NPAT, and EPS in 1HFY22. However, KGN expects to reap long-term business benefits.
• The net operating cashflows turned positive from (-) $23.4 million in 1HFY21 to positive $61.7 million in 1HFY22.

Key Financials, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of expanding in new verticals, increasing its subscriber base, profitability risk, and peer competition.  

Outlook:

• The company aims to expand Kogan Marketplace continuously and grow the Kogan First subscriptions to ~1 million subscribers by FY26.
• KGN expects robust contribution from Exclusive Brands and aims to progress further on integrating the Mighty Ape business to enhance the operating leverage.

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 gave a positive return of ~0.1894% in the past month and a negative return of ~35.33% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $4.500 - $13.690. The stock has been valued using the Price to Earnings per Share-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average P/E multiple, considering its negative bottom line, growth investments in Kogan Marketplace, etc., an uptick in the debt-to-equity ratio, etc. For this purpose of valuation, a few peers like Booktopia Group Ltd (ASX: BKG), Adore Beauty Group Ltd (ASX: ABY), Breville Group Ltd (ASX: BRG), and others have been considered. Considering the current trading levels, growth in Kogan First subscriptions, growth investments and plans, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $5.290, down by ~1.306%, as of 11 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

 KGN Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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