Online Stocks that Debunked Trends in Heavy Way: SSG, TPW, RBL, KGN

Summary

• Online businesses have been growing rapidly, primarily due to implications of the Great Lockdown.
• Shaver Shop Group has declared a special dividend, after cancelling interim dividend payment in the wake of COVID-19 crisis. Its business has performed strongly, and almost all of its stores are trading now.
• Temple & Webster also performed strongly in 2HFY20. TPW was carrying a decent amount of cash at the end of May 2020.

Since the Great Lockdown, online businesses are attracting investors’ attention as these businesses continued to operate amid the forced closure of retail stores. Although stocks in the related space were not favoured by the investor community in March, the stocks under discussion are now above the levels seen at the beginning of this year.

Consumers have increasingly dumped going out for shopping and favoured online shopping, reflected by increasing customer base of online businesses. Businesses with omni-channel retail capabilities have seen an increase in online sales as well.

Moreover, COVID-19 fear and restrictions have accelerated shift to online shopping and may have forced retailers to revisit their investment plans on new stores.

Shaver Shop Group Limited (ASX:SSG)

Specialty retailer of personal grooming and beauty products, Shaver Shop Group has reported a trading update. The Company has continued to experience strong sales momentum, as noted last month. In the second half to 14 June 2020, total sales grew 22.3%, while online sales went up by 164%, over the same period last year.

For FY20 to mid-June, total sales improved by 16.3% and online sales were up by 105% over the previous corresponding period (pcp). Online sales channel has continued to grow in the second half, representing 32% of total sales in the period to mid-June.

The Company is also welcoming customers at its stores, as it is re-opening stores gradually. Of its 116 stores in Australia, 112 stores are now trading, and all the Company’s NZ stores are now functioning. SSG expects to re-open all stores by mid-July 2020.

Its omni-channel investments have delivered value in the time of crisis, supporting growth over the past three months. SSG expects omni-channel strategy to drive growth in FY21.

SSG had cancelled its interim dividend payment of 2.1 cents per share, 80% franked, in the wake of COVID-19 crisis. Given the resilient trading performance and strong balance sheet, the Board has decided to pay a special dividend of 2.1 cents per share, 80% franked, having record date of 25 June 2020 and pay date on 16 July 2020. The Company expects to declare a further final dividend for the second half.

Shaver Shop Group also reinstated its guidance for the year FY20, as strong performance has continued in the last quarter of FY20. The Company expects total revenues to be in the range of $190 million to $195 million, compared with $167.4 million in FY19.

As per old lease accounting standard, the Company expects EBITDA to be in the range of $17.25 million to $18.25 million, depicting an increase of 28% to 35% against normalised EBITDA of $13.5 million in FY19.

On 18 June 2020, SSG last traded at $0.715, up by 15.323% from the previous close.

Temple & Webster Group Ltd (ASX:TPW)

Online retailer of furniture and homeware, TPW has reported that business continued to trade strongly in the second half with revenue growing at 90% against the previous corresponding period. The growth has propelled by strong performance in April and May as consumers took up online shopping.

The Company has experienced strong growth in all categories over the previous year. For the FY20 period to 31 May, the Company recorded an EBIDTA of $7.1 million, up by 668% from the pcp, revenue went up by 68% to $151.7 million, and active customer base grew to ~440k – an increase of 68%.

In May 2020, net promoter score of the business reached record levels, and the Company was carrying cash of $29.2 million at the end of month.

TPW is a cash flow positive, profitable and capital-light business with a debt-free balance sheet. In the furniture and homeware market, the Company is well-positioned to capture the growth due to shift to online.

On 18 June 2020, TPW last traded at $5.210, up by 3.992% from the previous close.

Redbubble Limited (ASX:RBL)

Redbubble Limited reported its third quarter FY20 business update in late-April 2020. For the YTD FY20 period ended 31 March, its marketplace revenue was $246 million, up by 25% over the pcp. It recorded a gross profit of $91 million for the period, up by 28%.

RBL had a cash balance of $31.9 million at the end of March. In 3Q, the marketplace revenue increased largely due to a stronger than expected start and consumer reaction to COVID-19. In April, the Company continued to record an increase in online sales.

The Company has also introduced cost-cutting measures, which would remain in place until 30 June 2020. RBL reiterated that external environment remains volatile and uncertain, owing to which the Company would not be providing forward-looking guidance. It also noted that business has a strong balance sheet, and additional initiatives can be taken to position for the changes in macro conditions.

Although the business has been benefitting from the change in consumer behaviour, the Company remains committed to its pre-COVID growth strategies and driving synergies within the group to capitalise on arising opportunities.

On 18 June 2020, RBL last traded at $1.425, up by 4.015% from the previous close.

Kogan.com Ltd (ASX:KGN)

Shares of Kogan.com have been on a secular upside run since hitting lows in March. Perhaps the business is increasingly favoured by the investor community as Kogan.com shares are trading near to its 52-week high.

Recently, the Company completed an institutional placement of $100 million. It is favourable for companies when fresh equity capital is raised near 52-week highs, as it means less dilution of shareholders’ stake.

The Company is conducting a Share Purchase Plan for retail shareholders, who were its shareholders on 9 June 2020. The plan closes on 3 July 2020, and new shares will be issued at a price used in placement, i.e. $11.45.

KGN has raised money to capitalise on the value-accretive opportunities that may arise in the future. Kogan.com is committed to acquire businesses that enhance its business model and drive customer base; it has been able to extract these values from its acquisition of Matt Blatt and Dick Smith.

On 18 June 2020, KGN last traded at $14.040, down by 0.071% from the previous close.