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.
Attempt #2 of posting my conservative DCF for Kogan attached. Fair value $16.22.
Let me know your thoughts!
I see this company doing well for quite some time and $12~ seems like a fair entry level to scale in for me.
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%
1HFY21 Highlights across the Kogan Group (including Kogan.com and Mighty Ape1 )
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:
disc: I do hold shares
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
Kogan has released trading details for July (here).
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.