ASX Small Cap Favourites: Kogan.com Limited
We’ve been watching and writing about Kogan stock over the past month, the recent results were a good scorecard into how the business is traveling post IPO. Earlier this month, we wrote a trading recommendation to Invast clients calling the stock a buy.
We noted “…The business appeals to us for the following reasons 1) It is a pure online play 2) The customer base is large and expanding 3) Revenue is modest with upside potential and 4) There isn’t meaningful profit there yet so the market isn’t willing to give it a higher valuation. The thing is Kogan is being viewed in the same way other industrial businesses.
We think this is a mistake, if it were listed in the US market, it would attract a much higher valuation given its market position. Eventually Kogan must prove to the market that it earns its market cap and has the ability to now start generating strong post tax profit for its shareholders…”
The earnings release didn’t do anything to blow away market concern around valuation. Sure, profit was higher than expected but to value KGN on a price to earnings ratio, based on current earnings may always lead to a limited valuation and market cap. KGN needs to prove to the market that its position online and customer base has not only the opportunity to grow revenue, but that this revenue can start turning into real hard bucks!
It may take time, but we’re prepared to stick to this very closely. A good summary of the result, vision and growth strategy here via Ross Greenwood’s Money News show on 2GB. Click to listen.
Invast is very well placed to bring you some huge opportunities in the coming months. Execution costs for ASX stocks are 0.06% (6 basis points) above minimum charge, which means for a trade with a notional exposure of AUD 10,000, the applicable commission is only AUD 6.00.
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Chief Market Analyst
Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia. The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.
Invast Financial Services Pty Ltd (ABN 48 162 400 035) is regulated by the Australian Securities and Investments Commission and holds an AFS Licence 438283 which authorises it to carry on a financial services business in Australia.