Kogan.com Limited

KGN Details

Recent Updates: Kogan.com Limited (ASX: KGN) runs a retail and services business portfolio comprising Kogan Retail, Kogan Internet, Kogan Cars, Kogan Marketplace, Kogan Mobile, etc.

• On 25 February 2022, KGN issued ~37,831 shares due to the vesting of performance rights issued as per an EIP (Equity Incentive Plan). The shares were issued for nil consideration and at an estimated value of ~$6.04 per share. The shares were also applied for listing on the ASX as of that date.
• KGN had issued ~37,831 performance shares to investors without disclosure and has now issued a notice under section 708A (5)(e) of the Corporations Act 2001 (Cth).
• Trading Halt: ASX notified the market of a pause in trading in KGN shares on 25 February 2022 due to a timing difference in the submission of the Financial Report & Results for 1HFY22 of KGN.

Delivered Record Revenue & Sales in 1HFY22 (ended 31 December 2021):

• The gross sales moved up to ~$698.0 million in 1HFY22 from ~$638.2 million in 1HFY21, up by ~9.4% YoY in 1HFY22. Contributions from Kogan Marketplace, Mighty Ape, and Kogan First subscriptions led to the growth in gross sales.
• The revenue increased from ~$419.5 million, up by ~1.3% YoY during the reporting period.
• KGN has added ~757,000 customers from the acquisition of Mighty Ape and is progressing well with the business integration. The Mighty Ape business has posted ~$93.8 million revenue, and ~$21.6 million gross profit in 1HFY22.
• The company exited 1HFY22 with a net cash position of ~$39.7 million as of 31 December 2021 driven by positive net operating cash inflows of ~$61.66 million.

Comparative Key Metrics Performance; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of supply chain disruptions due to COVID-19, technological changes necessitating higher investment and funding. It risks expansion of product range and development of brands, increased marketing spending for promotion, and brand recall. 

Outlook:

• The company has invested significantly in Kogan First and technology to scale up the platform which has affected its current operating costs, NPAT in 1HFY22. However, it expects to reap long-term benefits. In 2HFY22, KGN anticipates growing Kogan First subscriptions, Kogan Marketplace, increase contribution from its Exclusive Brands, and advance the integration of the Mighty Ape team and operations.
• KGN is advancing towards its five-year goal of ~$3 billion in annual Gross Sales.

Valuation Methodology: Price to Earnings 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 ~27.45% in the past three months and a negative return of ~46.27% in the past six months. The stock is currently trading lower than its 52-weeks’ average price level band of $4.500 - $14.490. The stock has been valued using the P/E-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’ mean P/E multiple, considering the net loss in 1HFY22, COVID-19 led supply chain disruptions and changes in consumer demand. For this purpose of valuation, a few peers like JB Hi-Fi Ltd (ASX: JBH), Booktopia Group Ltd (ASX: BKG), Adore Beauty Group Ltd (ASX: ABY), and others have been considered. Considering the current trading levels, positive net operating cashflows, rise in the active customers, expanded base with Mighty Ape acquisition, ongoing investment in product expansion & marketing, and indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $5.840, up by ~0.516%, as of 3 March 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  

Carbon Revolution Limited

CBR Details

1HFY22 (31 December 2021) Highlights: Carbon Revolution Limited (ASX: CBR) undertakes design, production, and distribution of carbon fibre wheels with applications in the transportation industry inclusive of aerospace, automotive, and commercial.

• The revenue was up by ~2.3% YoY from ~$17.2 million in 1HFY21 to ~$17.6 million in 1HFY22 due to an increase in the number of wheels sold (up ~1.6% Y-o-Y).
• CBR posted an increase of ~39% YoY in its underlying revenue in 1HFY22.
• CBR now has 15 programs in production or under development, up from ~12 in 1HFY21 to ~15 in 1HFY22.

Comparative Position of Cash & Debt; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological obsoletion, demand, and production changes, COVID-19 led to an increase in raw material & freight costs, and labour efficiency issues.

Outlook:

• The company has ~15 active programs including 4 Electric Vehicle programs under its umbrella and with three new programs in production.
• The Mega-line project is progressing on time and budget with the first wheel production scheduled in 2HCY22.
• CBR plans to continue to invest in the Mega-line project, R&D, recruitment of the launch team, and the engineering & procurement teams in FY22.

Valuation Methodology: Price to Book Value 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 CBR gave a negative return of ~18.51% in the past three months and a negative return of ~30.15% in the past six months. The stock is currently trading below its 52-weeks’ average price level band of $0.785 - $2.418. The stock has been valued using the Price to Book Value 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’ median P/BV multiple, considering the COVID-19 led increase in freight and raw material costs, indirect cost per wheel, and greater decline in EBITDA and NPAT in 1HFY22. For this purpose of valuation, a few peers like GUD Holdings Ltd (ASX: GUD), Bapcor Ltd (ASX: BAP), National Tyre & Wheel Ltd (ASX: NTD), and others have been considered. Considering the current trading levels, growth in the underlying revenue, 15 active programs in the pipeline, progress on the Mega-line project, robust growth outlook underpinned by a greater number of programs, and indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.880, as of 3 March 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.

 CBR Daily Technical Chart, Data Source: REFINITIV  

Good Drinks Australia Limited

GDA Details

Key Takeaways from 1HFY22 Results: Good Drinks Australia Limited (ASX: GDA) undertakes brewing, packaging, and marketing activities for the manufacture of beer and other alcoholic drinks.

• The revenue grew from ~$32.7 million in 1HFY22 versus ~$28.43 million in 1HFY21, up by ~16% YoY due to expansion in sales volume (up ~26% Y-o-Y).
• The NPAT fell from ~$3.58 million in 1HFY21 to ~$2.52 million in 1HFY22, down by ~30% on pcp.
• During 1HFY22, GDA acquired Joe’s Waterhole for ~$5.10 million consideration and created a fully owned entity Memorial Drive Hospitality Pty Ltd.
• GDA closed 1HFY22 with a robust cash position of ~$9.2 million as of 31 December 2021 and expects a positive cash flow impact in 2HFY21 due to the unwinding of its seasonally high debtor position.

Growth in Key Metrics; (Analysis by Kalkine Group)

Key Risks: GDA faces the risk of increasing inflation, supplier concentration, COVID-19 supply chain interruptions, which impact the company’s operating costs.

Outlook:

• In line with the company’s 5-year plan, GDA expects a rise in yearly sales and marketing spending by ~$2 million per year with a target of ~$12.0 million for FY22.
• GDA plans to keep the operating costs below ~$11.0 million for FY22.
• The company expects continued momentum to flow in 2HFY22 from 1HFY22. GDA expects a total production volume of ~19 million litres in FY22.
• GDA plans to deliver ~12 million litres in sales for Good Drinks brands in FY22.
• The company is progressing for the development of Matso’s Sunshine Coast and exploring further venue sites for Good Drinks in New South Wales (NSW).

Valuation Methodology: Price to Earnings 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 GDA gave a negative return of ~16.38% in the past three months and a negative return of ~17.77% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.710. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median P/E multiple, considering the increased operating costs, supply chain disruptions due to COVID-19, and expected increase in the marketing spending in 1HFY22. For this purpose of valuation, a few peers like Treasury Wine Estates Ltd (ASX: TWE), Lark Distilling Co Ltd (ASX: LRK), Australian Vintage Ltd (ASX: AVG) have been considered. Considering the current trading levels, growth in sales volume, strategy to grow production volume, and Good Drinks venues in FY22 and beyond, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.740, down by ~5.129%, as of 3 March 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.

GDA 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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