Kogan.com Seeks to Raise $50m in IPO
Kogan has experienced revenue growth and has been earnings positive for the past ten years.
E-commerce company Kogan.com seeks to raise $50 million in an initial public offering to list on the ASX on June 30.
Many years ago – before the internet - consumers would exclusively transact through physical store networks. In today’s day and age, pretty much anything can be bought online and companies have transformed to ‘omni-channel retailers’ which offer their products through online channels as well. In Australia some of the most known brands in this space are JB Hi-FI, Harvey Norman, The Good Guys, Myer or David Jones.
The latest IPO comes from a ‘pure-play’ online retailer called Kogan.com Ltd, an Australian e-commerce company which earns revenue via the sale of goods to domestic consumers. The company’s primary asset is intellectual property (“IP”) surrounding the “Kogan.com” brand and sells over 28,000 private label and third party products. The website had over 52 million visits in 2015.
Kogan has experienced revenue growth and has been earnings positive for the past ten years. Revenue is derived from transaction volumes and with a relatively high degree of fixed costs, Kogan has operating leverage to increase EBITDA margins. The acquisition of Dick Smith’s online assets in April 2016 adds 1.3m subscribers to the existing database of 2.3m, not considered in prospectus forecasts.
However, Kogan’s EBITDA margins have historically been volatile and despite achieving consistent revenue growth, the company has not been able to post material earnings growth. In addition, there are regulatory risks regarding the suspension of GST free online purchases, which if approved could reduce the attractiveness of Kogan’s products.
While Kogan does not intend to pay a dividend, revenue and earnings growth stand as the primary value drivers. With FY15 EBITDA margins below 1% there is scope for growth, however dominant shareholding of management and lack of earnings growth record may dampen interest in the float.
Company: Kogan.com Ltd
ASX Code: KGN
Shares on Offer: 28.4m
Listing Price: $1.80
Market Capitalisation: $168m
Listing Date: June 30
Author: Simon Herrmann
Jun 22, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.