Kogan.com Ltd

KGN Details

Business Update: Kogan.com Ltd (ASX: KGN) operates a portfolio of retail and services-led businesses that comprise of Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Travel, to name a few. As per a recent update, the company has been removed from S&P/ASX 200 Index, which will be effective prior to opening on 20 December 2021.

AGM Update:

The Group has held its AGM on 25 November 2021, where the management has highlighted its performance in FY21, amidst the impact of the COVID-19 pandemic.

• Gross sales increased by 52.7% to $1.179 billion in FY21, compared to FY20.
• The increase in sales led to an increase in gross profit by ~61% to $203.7 million in FY21.
• Adjusted NPAT also grew by 43.2% to $42.9 million in FY21.
• The company reported its active customer base at 3,971,000 during FY21 end, reflecting a growth of 46.9% on FY20 end.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The Group’s line of business makes it prone to the challenges of inventory management. Any mismanagement on this aspect can impact the company’s profitability. 

Outlook: The company has delivered gross sales of $432.7 million during the YTD period from July to October 2021, compared to $363.1 million in the pcp. The growth was mainly driven by a decent performance from Kogan Marketplace and Kogan First. It is also well-poised to reap the benefits of the current peal sales period with events like Kogan Frenzy, Black Friday, Christmas, and Boxing Day sales.

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 KGN is trading below its average 52-weeks' levels of $7.200-$21.890. The stock of KGN gave a negative return of ~55.49% in the past one year and a positive return of ~0.6211% in the past one week. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount to its peers’ median EV/Sales multiple, considering the substantial drop in ROE performance, and uptick in leverage levels, etc. For the purpose of valuation, peers such as Redbubble Ltd (ASX: RBL), Adore Beauty Group Ltd (ASX: ABY), Zebit Inc (ASX: ZBT), and others have been considered. Considering the current trading levels, indicative upside in valuation, increase in gross sales & active customers, sales events wrt to peak season and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $8.02, as of 09 December 2021, 12:05 PM (GMT+10), Sydney, Eastern Australia.

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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