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Summary
- COVID-19 pandemic supercharged the e-commerce market, followed by retailers witnessing a massive surge in their online sales in recent times.
- KGN saw a rising trend in the active customer base representing a strong repeat purchasing behaviour. Further, KGN experienced robust growth of more than 100 per cent in its gross sales (YoY) during April and May 2020.
- KGN has also completed an underwritten Institutional Placement worth AU$ 100 million and is all set to roll out Share Purchase Plan. The proceeds will be utilised to provide financial flexibility to boost upcoming opportunities.
Are you ordering your grocery online? Yes! No! Yes! It would not be surprising to say that coronavirus gave a boost to the online marketplace. Nowadays, people are following social distancing norms and feel secure with touchless shopping.
Like rest of the world, Australia too was under lockdown starting mid-March 2020 till April that had an adverse impact on the economy, including the retail industry. During the lockdown phase, most of the physical stores were shut and people barely ventured out of their homes.
Australian Bureau of Statistics (ABS) released statistics related to the retail industry in early June, this year. The statistics stated that retail turnover decreased by 17.7 per cent in April 2020 as compared to an increase of 8.5 per cent in March 2020 based on seasonally adjusted terms.
Of late, numerous retailers bolstered their online presence to combat COVID-19 crisis. Moreover, consumers opted to purchase online, which led to a paradigm shift in their shopping patterns. This change in the shopping patterns will undoubtedly take a big leap boosting the sales of e-commerce retailers every month, as the time passes by, during 2020.
Hey, this leap is here to stay!
Did you read; Retail Industry Embraces Re-openings and Digital Shift amid COVID-19 Disruptions
Let’s acquaint ourselves with one such retailer, Kogan.com.
Australian online marketplace, Kogan.com Limited (ASX:KGN) operates in both retail and services businesses. KGN conducts its business under various family brands such as Kogan Retail, Kogan Mobile, Kogan Marketplace, Kogan Cars, Kogan Insurance, Kogan Money, Dick Smith, Matt Blatt, Kogan Internet Kogan Energy and Kogan Travel.
KGN has successfully navigated through the disruption erupted by COVID-19 and demonstrated strong performance despite being a pure-play online retailer in comparison to retailers with multi-channel presence.
Did you read; 6 Stocks that Weathered the COVID-19 Storm - ANN, KGN, XRO, RMD, MIN, FMG
COVID-19 has been a blessing in disguise for KGN’s soaring shares
KGN’s share price has been swaying on ASX with a rise in the share price from AU$3.79 on 16 March to AU$13.29 (at AEST 1:09 PM), as on 15 June 2020. The up swinging share price during the pandemic has been a blessing in disguise for KGN’s business. Also, the increase is buoyed by the positive business updates during April, May, and June, showcasing soared active customers and earnings during the crisis period.
Source: ASX
KGN released its investor presentation on 10 June 2020, wherein it mentioned that the Company held a solid track record as reflected between IPO in July 2016 to 9 June 2020 and has delivered a total shareholder return (TSR), of 654.5%. It has also paid is dividends regularly to its stakeholders and acquired brands like Dick Smith and Matt Blatt.
Source: Company’s presentation
Did you read, Online retailer Kogan.com in Action; Registers Fresh 52-Week High
KGN completed AU$ 100 million Placement
On 11 June 2020, KGN announced completion of its AU$ 100 million underwritten institutional Placement. The Placement comprises of an issue of ~8,733,625 new (fully paid ordinary) shares at a price of AU$ 11.45/ new share.
The offer price represents a 7.5 per cent reduction to KGN’s last closing price of AU$ 12.38, as on 9 June 2020 and a discount of 7.9 per cent to the two-day Volume Weighted Average Price (VWAP) on 9 June 2020 of AU$ 12.43.
The settlement of the shares is expected to begin from 16 June 2020 followed by the schedule of allotment of the new shares for 17 June 2020.
Royal Bank of Canada and Canaccord Genuity (Australia) Limited are noted as the joint lead managers and underwriters to the Placement.
Under non-underwritten SPP, KGN will roll out an offer of new shares for its existing stakeholders, while facilitating every eligible stakeholder to apply for up to AU$ 30,000 worth of new shares at offer price of AU$ 11.45. KGN is planning to raise additional AU$ 15 million under SPP offer. However, it reserves the right to increase the size of SPP.
In early June 2020, KGN provided business performance update highlighting the impressive operational and robust financial performance.
Operational performance
KGN witnessed an increase of 126,000 active customers in May 2020 and had 2,074,000 Total Active Customers (TAC) by the end of May’20.
Source: Company’s presentation
Financial performance
KGN witnessed an increase of over 100 per cent in its gross sales. The gross profit saw an upsurge of more than 130 per cent during April and May (fourth quarter 2020 till 5 June) versus pcp.
Adjusted EBITDA saw a massive growth of 219.3 per cent (year on year) across 4QTDFY20, and the average run-rate of Adjusted EBITDA per month across the same period was AU$ 7.0 million.
Moreover, KGN’s AU$ 58.6 million cash in hand, along with drawn debt facility of AU$ 26.0 million on 31 May 2020 reflected a robust balance sheet.
It looks like good news is on its way for KGN’s CEO!
Mr Ruslan Kogan, CEO KGN is set to sail in a boat of successful business, thriving amid coronavirus, with shares trading at AU$ 13.29, up by 1.065 % (at AEST 1:09 PM), as on 15 June 2020. KGN has a market capitalisation of AU$ 1.25 billion, and an annual dividend yield of 1.19% and a PE multiple of 66.210x.
KGN’s growing customer base, robust business performance and diverse supply chain makes it an interesting stock to watch out for.
