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Australia | Retail | Household Goods
Market capitalisation   AUD 306.4m
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Overview

KGN is a diversified electronics, homewares, office and clothing retailer that designs, sources and resells products online through its Kogan and Dick Smith platforms in Australia, New Zealand and the United States.

Business Lines

KGN derives almost all of its operating revenues online, which totalled AUD412.3 million in the 2018 financial year.

KGN designs and sources consumer electronics, appliances, homewares and other items that it has externally manufactured and packaged in China under its proprietary Kogan, Ovela, Fortis and Certa brands. It also sources Apple, Canon, Samsung, HTC, Swann and other branded products from domestic and international wholesalers that it resells online through its Kogan website (www.kogan.com) in Australia, New Zealand and the United States, its Dick Smith websites (www.dicksmith.com.au and www.dicksmith.co.nz) in Australia and New Zealand and its eBay store  (www.stores.ebay.com/kogan) in the United States. Most of its products are distributed directly to its customers from one of several leased warehouses in Australia and Asia using third-party logistics providers.

KGN also owns and operates: a retail travel website called Kogan Travel (www.kogan.com/au/travel) that facilitates the booking of hotels, cruises and holiday packages in Australia; an online mobile services retailer called Kogan Mobile (www.koganmobile.com.au) that sells prepay mobile plans in Australia; Kogan Internet (www.koganinternet.com.au) that sells broadband internet services; and an insurance website called Kogan Insurance (www.koganinsurance.com.au) that sells car, home, travel, pet and life insurance that is underwritten by third parties.

Strategy, Risks and Opportunities

Online retailers generally have lower operating cost structures than their ‘bricks and mortar’ competitors and are therefore able to offer lower prices for the same or similar products. They are also less constrained by the location of their customers, but are more dependent on the efficiency of their logistics and delivery services. Companies try to maximise their operating leverage and minimise their inventory levels by selling on-trend products at competitive prices, by improving their end-to-end customer fulfilment, and by frequently upgrading their websites and reducing any payment friction.  Specifically, KGN has indicated its near-term focus is to:  enhance its marketing and continue to resell new and improved products with a particular emphasis on its own branded products; growing its mobile, internet and insurance offerings and expanding into new verticals and products [1].

KGN competes directly with other domestic and international electronics retailers, clothing retailers and other household product suppliers that are also trying to attract customers through various pricing, quality and other customer propositions. Some of its larger domestic and international competitors are Harvey Norman of Australia, Kmart of Australia, Amazon of the United States, Alibaba of China and The Warehouse of New Zealand.

KGN owns several established online retail platforms with reliable channels to market in Australia. It also has operations in different countries, giving it some ability to allocate more of its resources to countries with favourable demand drivers and exchange rates, and vice-versa. Going forward, it should continue to benefit from increased sales and economies of scale through organic growth, expanding its product range and geographic presence, optimising its operations and supply chain as well as undertaking complimentary and value-accretive acquisitions. Its downside commercial risks could include: a broader economic slowdown that could affect the propensity of customers to purchase discretionary electronic goods, homeware and clothing; continued erosion of market share and gross margins from new online retail platforms and multinational competitors who hold little inventory and generally have lower fixed operating costs; restricted growth due to a lack of financing, consumer awareness or attempting to enter multiple markets without gaining traction in any particular market; loss of a key distributor, supplier or employee; changes to the availability, quality and delivered price of wholesale products and third party supplier costs that are unhedged and cannot be passed on to customers through pricing increases; a depreciation of the AUD, which would increase the unhedged cost of its imports (equally however, this could reduce the propensity of domestic customers to source alternative products from other competing international suppliers); and any inheritance of undue liabilities or commercial risks through new product offerings, acquisitions and entrances into new markets.

History

2016: Kogan was founded in 2006 by Ruslan Kogan as an Australian online retailer of proprietary branded consumer electronics. After an unsuccessful attempt at entering the United Kingdom in 2010, Kogan instead began to import and resell third-party products in 2011. The following year it launched an online mobile services retailer called Kogan Mobile, which was later closed after the collapse of ispONE. Kogan began reselling and distributing products to New Zealand and the United States in 2014 and it also relaunched Kogan Mobile and an online travel website called Kogan Travel in 2015. Kogan was first listed on Australian Stock Exchange in 2016 (KGN.AX), prior to which it acquired the brand name, websites and customer database of **** Smith

2017: KGN entered into a 3-year partnership with The Holland Insurance Company to offer home, contents, landlord, car and travel insurance under a new Kogan Insurance brand

2018: KGN entered into a partnership with Medibank Group to offer health insurance under a new Kogan Health brand, a partnership with PetSure to offer pet insurance under a new Kogan Pet Insurance brand, a partnership with Greenstone Financial Services to offer life insurance and funeral insurance under a new Kogan Life Insurance brand, and a partnership with Vodafone to offer broadband internet services under a new Kogan Internet brand.  KGN expanded its range of products to include own-branded whitegoods and built-in kitchen appliances  

2019: KGN entered into partnerships with: Adelaide Bank and Pepper Group to offer home loan products under a new Kogan Money brand; Mercer to offer superannuation products under a new Kogan Super brand; and Citigroup to offer a credit card product under the Kogan Money Credit Card brand 

Governance

KGN was first listed on the Australian Stock Exchange on 07 July 2016. It had 93.3 million shares on issue at the end of the 2018 financial year, 37% of which were owned by Kogan Management, 5% each by Challenger and Greenscape and the rest by a mix of approximately 8,200 retail and institutional investors.

The KGN Board collectively owned 41.1 million shares at the end of last year. The Board currently comprises: 

  • Greg Ridder has been the Independent Chairman since May 2016. Greg comes from an accounting background and was previously the Asia Pacific Regional President of Owens-Illinois. He also serves on the boards of a number of private companies;
  • Ruslan Kogan has been a Non-Independent Director and the Chief Executive Officer since founding the business in 2006;
  • David Shafer has been a Non-Independent Director since November 2010. David is also the Chief Financial Officer of KGN; and
  • Harry Debney has been an Independent Director since May 2016. Harry is currently also a Director and the Chief Executive Officer of Costa Group.

Ruslan Kogan has been the KGN Chief Executive Officer and a Non-Independent Director since founding the business in 2006. Ruslan comes from a business background having previously founded an online furniture retailer called Milan Direct. 

References

Unless otherwise stated, all numbers are based on those reported at the end of the prior financial year.

KGN’s historic Annual Reports, Presentations, Prospectuses and Other Announcements can be viewed below or they can be sourced from its website (www.kogancorporate.com) or the Australia Stock Exchange (www.asx.com.au)

KGN.AX Annual Report 2018 - KGN.AX Annual Result Presentation 2018 |​ KGN.AX Annual Report 2017 - KGN.AX Annual Result Presentation 2017 | KGN.AX Annual Report 2016 - KGN.AX Annual Result Presentation 2016 - KGN.AX Prospectus 2016

[1] Refer to pages 3 and 4 of the KGN Annual Report 2018

Comparative Metrics

Summary Income Statement (AUDm)

FY17AFY18AFY19FFY20FFY21F
Revenue 289.1 412.3 504.7 569.6 629.1
Revenue growth 36.9% 42.6% 22.4% 12.9% 10.4%
EBITDA 11.7 25.3 30.9 32.6 33.4
EBITDA Margin 4.1% 6.1% 6.1% 5.7% 5.3%
NPAT normalised 5.7 13.2 18.8 20.1 21.0
NPAT reported 3.7 14.1 18.8 20.1 21.0
EPS normalised 6.1 14.1 20.1 21.5 22.4
EPS growth >100.0% >100.0% 42.1% 7.0% 4.5%

Summary Balance Sheet (AUDm)

FY17AFY18AFY19FFY20FFY21F
Total assets 80.3 106.0 119.1 123.9 129.7
Net debt -32.0 -42.6 -43.6 -39.3 -37.1
Total liabilities 37.7 58.1 67.2 75.3 83.5
Shareholders' equity 42.7 47.9 51.9 48.6 46.2
ROCE 17.1% 38.1% 45.9% >50.0% >50.0%
WC to revenue 2.6% 0.4% 0.9% 1.0% 0.8%
Net debt to capital <-100.0% <-100.0% <-100.0% <-100.0% <-100.0%
Interest cover >25.0 >25.0 >25.0 >25.0 >25.0

Summary Cashflow Statement (AUDm)

FY17AFY18AFY19FFY20FFY21F
Operating free cashflow 10.9 27.8 21.1 24.1 26.4
Capital expenditure 3.6 7.2 5.3 5.0 5.2
Distributable cashflow 3.8 20.6 15.8 19.1 21.2
Post-tax DPS declared 7.7 13.0 17.5 25.0 25.0
Franking 100.0% 100.0% 100.0% 100.0% 100.0%
Payout 126.8% 92.0% 87.3% 116.4% 111.4%
Dividend cover 1.0 1.9 1.0 0.8 0.9

Summary Discounted Cashflow Valuation (AUDm)

Financial year end30-JunShares on issue93.7
WACC9.8%TV/DCF56.2%
Explicit value301.0Terminal value169.3
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4d
The Kogan.com share price has increased 5.2% today, compared to 0.2% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
  0
1w
The Kogan.com share price has increased 7.8% today, compared to 1.0% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
  1
2w
The Kogan.com share price has increased 6.3% today, compared to 0.9% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
  0
2w
Among the big gains on the market today is Kogan.com, up 8.9 per cent to $3.07. This morning Kogan.com announced a deal with Citigroup for a ......Click Here
  0
2w
The Kogan.com share price has increased 7.1% today, compared to 0.1% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
  0
3w
Kogan.com.au spokeswoman Lauren Dalton said the online shopping destination started Black Friday on Monday and claimed more than 2000 deals ......Click Here
  0
3w
The Kogan.com share price has increased 5.9% today, compared to 0.3% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
  0
4w
The Kogan.com share price has decreased -5.0% today, compared to 0.3% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
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The likes of furniture store Nick Scali, online electronics retailer Kogan.com, costume jewellery retailer Lovisa, apparel company PAS Group and ......Click Here
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Kogan Super will leverage Kogan.com's digital proficiency and large customer base while relying heavily on passive investment strategies to keep ......Click Here
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Lovisa's share-price dive comes after online retailer Kogan.com's shares sank by almost a third on Monday after it revealed that new rules forcing it to ......Click Here
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The Kogan.com share price has decreased -7.3% today, compared to -0.6% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
  0
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Kogan.com's shares fell by a third on Monday after the online retailer revealed that being forced to apply GST to smartphones and other leading ......Click Here
  1
1m
The Kogan.com share price has decreased -26.3% today, compared to -2.5% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
  0
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Shareclarity has revised the Kogan.com Limited DCF Valuation, which has remained at AUD3.62. The value gap is now -22.0%.Shareclarity take: "KGN gave a Q1 update and flagged decreased gross profit margins due to increased competition and the weaker AUD. These were already factored into forecasts and therefore no change to value. "
  1
2m
The Kogan.com share price has decreased -5.9% today, compared to -1.7% by the other 14 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
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Shares in Kogan.com slumped as much as 9.9 per cent to reach an intra-day low of $6.33 shortly after the market opened after after co- founders ......Click Here
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The Kogan.com share price has decreased -8.0% today, compared to -0.4% by the other 13 Retail (Household Goods) companies on Shareclarity.Shareclarity will review all publicly available information and update the DCF valuation accordingly.
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The quality of some products sold by the country's top electronic retailers, including Kogan, Samsung and Harvey Norman, is "not good enough", says ......Click Here
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The online retailer told the stock market that "Kogan.com Limited no longer has the power to control the disposal of any Shares held by entities ......Click Here