Should I Buy Kogan Shares?
Should I Buy Kogan Shares?

The Kogan Share price has had a disappointing year. With the share price of the online retailer falling 45%. So we take a look at recent Kogan news and see over the long term, Should I Buy Kogan Shares?

Kogan Shares Price

The Kogan Share Price has fallen a massive ~45% alone this year, however, there is a little bit more relief for holders over the last 5-years with shares up +625%.

Shares have a 52-week range of $8.70 – $25.57 and are currently trading towards the bottom end of the range.

Kogan Share Price$11.50 per share
Kogan Market Cap$1.2billion
Shares Outstanding106.6Million
Price to Earnings41.1
Kogan Share Price Stats

Kogan Stock trades on a price to earnings of 41.1 times which is significant and is also above the average of the broader ASX market. The company would need to be growing at a significant rate in order to justify such a PE ratio.

Kogan Share Price Drop

Whilst it’s hard to put a finger on exactly what has gone wrong for KGN ASX over the past year if you scroll out a little the 5-year performance is still extremely impressive. In our opinion shares are simply taking a breather as they were likely overvalued based on price to sales and price to earnings.

The Kogan stock price rallied over the COVID-19 pandemic. Prior to the pandemic, the share was trading around $4.50 per share to then hit all-time high’s be trading at over $25 for a brief period of time.

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At a share price of 25$, Kogan would have had a PE of over 65x and a high price to sales ratio. In our opinion, this was simply too high as Kogan only grew revenues by 45% and EBITDA by 23% in their H12021 report. Whilst EBITDA improved this was slowed in comparison to the prior comparable period.

Kogan Shares Dividend History

Kogan currently pays a dividend yield of 2.57% or a fully grossed-up yield of 3.66%. This is decent for a growth company. The company has paid a fully franked dividend each year since listing on the ASX.

The KGN ASX dividend has been typically increasing each year since its commencement in 2017.

Should I Buy Kogan Shares?
Kogan Dividend History

KGN shares typically announce a dividend with the release of its half-yearly results in March and full-year results in August as seen in their financial calendar.

Dividends are typically paid twice a year. In May (Interim Dividend) and October (Final Dividend).

Kogan Fundamentals

Market Cap$1,225,457,975
Shares Issued106,561,563
ASX Rank273
Volume 4W Avg1,191,987
NTA per Share$1.10
Kogan Share Price Fundamentals

Kogan has a high return on equity at 20.8x and a decent NTA per share with $1.10 per share intangible assets. The price to earnings ratio is high at 29.95x however due to the large increases in EBIDTA and revenue growth this is potentially justified.

The company also have a low debt to equity ratio of 1.4% which is a good sign in our opinion.

Kogan Share Price Financials

Kogan on the 26th of February released notable news in the form of their Half Year FY21 results to the market. Headline news from the earnings results are summarised below:

  • has delivered its highest Gross Profit result in the half-year ended 31 December 2020 with Gross Profit up $63.0 million (126.2% 1) on the prior corresponding period.
  • The Group achieved EBITDA of $38.8 million in 1HFY21 (1HFY20: $16.7 million).
  • Continued growth in Active Customers of 1,304,000 (76.8%). As at 31 December 2020, the business (excluding Mighty Ape) had Active Customers of 3,003,000.

Kogan Stock Income Statement

Revenues for the half-year FY2021 increased to $414,009 million which represents an 88.6% increase on the prior corresponding period. This is significant growth for the online retailer.

Gross profit also increased significantly, outpacing the rate of revenue growth. This may potentially mean Kogan is starting to see good traction of their own Kogan branded items, with a larger GP margin.

Kogan Income Statement for HY2021
Kogan Income Statement for HY2021

Kogan ASX Balance Sheet

The group has managed to grow its strong asset base from $279,667million in the prior comparable period to $415,807million as of the current period. It should be noted that it seems that Kogan has converted a substantial amount of cash into additional inventories.

There is a risk if the company fails to buy the right stock and be able to sell these inventories it may result in reduced margins due to potential discounting. This is not uncommon news for Kogan to be discounting their inventories.

Kogan finishes the year up with $415.8 million in net assets, which has increased ~48% from the previous half-year result.

Kogan ASX Balance Sheet
Kogan ASX Balance Sheet

Insider Ownership and Trading

We can see that the general public and institutions own the majority of Kogan shares at 42.4% and 36.8% respectively. This is a common trend amongst most listed shares.

We can see individual insiders have a significant ownership stake also at 20.9%. This includes the founder himself Ruslan Kogan who owns 14.88% of the company with a value of over $180million. David Shafer, COO and CFO also own a significant portion of shares which 5.8% of the company.

Kogan Shares Price Ownership Breakdown
Kogan Shares Ownership Breakdown
Name#SharesCurrent ValueOwnership
Ruslan Kogan15,853,321A$182.3m15%
Hosking Partners LLP6,392,876A$73.5m6.00%
David Shafer6,075,642A$69.9m6%
FMR LLC4,225,350A$48.6m3.97%
Credit Suisse, Investment Banking and Securities Investments3,820,330 A$43.9m4%
Top 5 Shareholders In Kogan Stock

Kogan Stock – Prophets Take

Whilst the company is competing in a space we greatly believe will continue to grow, there is still the key risk of other competitors entering the space. We will continue to monitor the growth of other major players such as industry incumbent Amazon.

The decision of Kogan to purchase in our opinion what were high inventory levels at the back end of 2020, will be interesting to see play out and see if these convert into sales. Historically if retailers cannot sell stock at expected rates, they end up having to discount stock and pay additional costs in warehousing the inventories.

In our opinion, it seems that the growth that was being reported during the heights of the COVID pandemic was an unrealistic assumption of future growth rates. This is now apparent to us from the preceding reports released by the company later in the year.

The Kogan FY2021 annual report will be one that we will be paying very close attention to, we would like to see the following play out before considering Kogan stock any further.

  • Reduction of inventories
  • Increasing gross profit margins
  • increasing usage of the Kogan Marketplace platform
  • Growth rates as compared to COVID-19 peak rates.

What Are We Currently Buying?

In the past few weeks here are some exciting companies we jumped in on:

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