Consensus community valuation
$22.09
Average Intrinsic Value
77.2%
Undervalued by
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#Valuation Detail
Added 2 weeks ago

Valuation details from my Feb valuation in response to CHill's great valuation model.  Discount rate and terminal growth rate variances are the only significant points of difference.

I maintain my view on valuation at $39.04, based on the attached.

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#Business Model/Strategy
Added 3 weeks ago

Attempt #2 of posting my conservative DCF for Kogan attached. Fair value $16.22.

Let me know your thoughts!

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#Bull Case
Added 3 weeks ago

I see this company doing well for quite some time and $12~ seems like a fair entry level to scale in for me.

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#Bull Case
Added 4 weeks ago

I see this as an opportunity to add more of the largest Australian online retailer which is trading well off it's earlier highs and well below consensus.
Sells both branded and private-label products; also sells a wide array of services including mobile, NBN/Internet, health insurance, and energy.
Consensus price target of ~$18.00
Utilising technology to build a low-cost operation that works at scale. That’s a competitive advantage, which once established can be a powerful moat around the business for years to come. 
1st half results were strong with gross profit growth of 175%
 

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#Bull Case
Added 2 months ago

1HFY21 Highlights across the Kogan Group (including Kogan.com and Mighty Ape1 ) 

  • Gross Sales2 of $638.2 million, up 97.4% on prior year (1HFY20: $323.43 million)
  • Revenue of $414.0 million, up 88.6% on prior year (1HFY20: $219.5 million)
  • Gross Profit of $112.9 million, up 126.2% on prior year (1HFY20: $49.9 million)
  • Adjusted EBITDA4 of $51.7 million, up 184.4% on prior year (1HFY20: $18.2 million)
  • Adjusted NPAT4 of $36.5 million, up 250.2% on prior year (1HFY20: $10.4 million)
  • NPAT of $23.6 million, up 164.2% on prior year (1HFY20: $8.9 million)
  • Adjusted EPS4 of $0.35 per Share, up 211.7% on prior year (1HFY20: $0.11 per Share)
  • Growth in Kogan.com Active Customer base (excluding Mighty Ape) to 3,003,000, up 76.8% from 31 December 2019. Mighty Ape Active Customers grew to 719,000 at 31 December 2020
  • Cash at period end was $79.05 million with $1.4 million of the Group’s debt facility drawn within Mighty Ape
  • Fully franked interim Dividend of 16.0 cents per Share, up 113.3% on prior year (1HFY20: 7.5 cents per Share)

Outlook

Kogan.com is a dynamic portfolio of businesses — there is always more that we can do and new ways we can delight our customers. During 2HFY21, we are due to further expand our Exclusive Brands, enhance and develop Kogan Marketplace, complete the integration of the Mighty Ape team and operations, and further grow the Group’s Active Customer base. Consistent with prior years, the Company will not be providing earnings guidance for 2HFY21. However, the Company will provide regular business updates during the period. January 2021 unaudited management accounts show: 

  • Gross Sales2 grew more than 45% YoY, which included:
    • 111.6% growth in Kogan Marketplace
    • 54.6% growth in Exclusive Brands
    • negative growth in some New Verticals, driven by Travel and Insurance (inc Travel Insurance and certain other Insurances, which remain suspended
  • Gross Profit grew more than 102% YoY
  • Adjusted EBITDA4 grew more than 90% YoY.

Interesting Takeaways. 

  • How sticky the platform is: Kogan has reported exponential growth in repeat customers/repeat orders across 2020 and beginning of 2021. With the amount of verticals the platform has this is little surprise. "... is expected to grow as product range expands, loyalty benefits improve, and customers increasingly come to rely on Kogan.com for more of their general shopping needs"
  • For example, a customer comes to shop online and are met with verticals such as Kogan Mobile (grew 12.9% YoY, but almost nothing HoH - Kogan Mobile NZ launched 1hFY20), Kogan Internet (customers grew 17.9%, Kogan Energy & Kogan Credit Cards (both experienced growth). At the moment these assorted verticals only contribute approximately 9% of revenue (including kgn mobile aus). 
  • it is also noteworthy to see that Gross and EBITDA Margins have been growing HoH since 2018: from 19.4% Gross in 2018 to 27.3% in 1HFY21 and 6.7% EBITDA margin in 2018 to 12.5% in 2021. As the company grows and top line numbers increase drastically, management are able to stretch margins wider.

disc: I do hold shares 

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#Business Update 29/1/21
Added 3 months ago

Record half including record breaking Black Friday week and Active Customers surging past three million

1HFY21 Highlights across the Kogan Group (including Kogan.com and Mighty Ape ) 1

? Gross Sales grew by more than 96%

? Gross Profit grew by more than 120%

? Adjusted EBITDA 2 grew by more than 175%

? EBITDA grew by more than 140%

? Cash at period end was A$78.9M with A$1.4M of the Group’s debt facility 3 drawn within Mighty Ape

? Active Customers was 3,003,000 for Kogan.com and 719,000 for Mighty Ape

DISC: I hold in both Strawman and TRW

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#July Business Update
stale
Added 8 months ago

Kogan has released trading details for July (here).

  • Active customer numbers increased ~5.8%
  • Gross sales were up 110% YOY
  • Gross profit grew 160% YOY

This shows an acceleration from the strong gains reported for June (here). Very impressive.

Based on unaudited figures released to date, the company is trading on a EV/EBITDA ratio of approx 36x. (using adjusted EBITDA of 49.7m for FY20 -- a 32%-odd imporvement on FY19). That likely translates into a PE of roughly 65 or so.

The current share price is probably about fair if you assume this annual pace of growth can be sustained in the coming years. The question is how much of this is due to the covid-induced acceleration to online shopping; is it a one-off sugar hit, or something more sustainable?

I'm also mindful that the macro conditions still appear challenging -- especially once government support payments start to roll back. This is discretionary retail after all. 

It is worth noting that Kogan has fared extremely well in the face of Amazon's launch into Oz -- something that I was worried would crimp their growth. Credit where it's due.

I'm not a holder, and not inclined to be at the current price -- i'd want a wider margin of safety.

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