Kogan.com Ltd

KGN Details

AGM Presentation Update: Kogan.com Limited (ASX: KGN) is a portfolio of retail and services businesses comprising Kogan Retail, Kogan Mobile, Kogan Internet, Mighty Ape, and others.

• Key Financial Update: FY22 YTD (July 2021 - October 2021) KGN's gross sales stood at $432.7 million, up from$363.1 million reported in the year-ago period and adjusted EBITDA clocked $12.4 million against $32.0 million reported in the pcp. Kogan First members have grown by 270.1% in October 2021 relative to June 2020. Kogan Marketplace gross sales embarked upon 49.8% year-over-year growth in Q1FY21. Operating costs have been a critical focus for KGN, largely warehousing and marketing costs.
• Product Expansion: Until 31 October 2021, total products on Kogan.com platform grew by 304.2% on pcp and unique exclusive brand products surged by 32.3% year-over-year, with a 102.5% CAGR (October 2019 – October 2021). Unique products in warehouse surged by 195.7% on pcp in FY21.
• Improved Delivery to Customers: Kogan delivery services has sought a significant uprise on monthly basis. In October 2021, it rose by 66.7% on a QoQ basis and in September 2021 it rose by 55.6% sequentially. The count of inventory-based items dispatched inclined by 50.2% YoY.

Financial Performance, Analysis by Kalkine Group

Key Risks

• The company faces high supply chain disruptions from COVID-19, online retail competition, and Australian retail trade volatility.
• KGN has faced inventory management issues due to its high dependency on a relatively small portfolio of suppliers.

Outlook

• Scaling Marketing Activities: KGN to scale marketing activities and focus on Kogan First membership program. Additionally, KGN holds a robust pipeline of new sellers for Kogan Marketplace.
• Growth Targets: In the last five years, gross sales surged by 39% and for the next five years KGN expects $3 billion in gross sales by FY26.
• Increasing Market Penetration Opportunities: National Australia Bank (NAB) estimated $48.6 billion consumer expenditure on online retail for 12 months to June 2021. The expenditure sustains around 13.3% of total retail trade estimate.

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 gave a negative return of ~49.60% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $7.710 - $21.890. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at a slight premium to its peers’ average EV/Sales multiple, considering improved platform position, increased active customers and favourable sequential growth. For valuation, few peers like Redbubble Ltd (ASX: RBL), Adore Beauty Group Ltd (ASX: ABY), Booktopia Group Ltd (ASX: BKG) and others have been considered. Considering current trading levels, scaling marketing investments, improving active customer base, robust pipeline of new sellers, upside indicated by valuation and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the market price of $7.800, as of 29 November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

KGN Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.