About: Kogan (KGN) is a portfolio of retail and services businesses that includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance and Kogan Travel. Kogan is a leading Australian consumer brand renowned for price leadership through digital efficiency. The company is focused on making in-demand products and services more affordable and accessible.

Why it’s in the portfolio: We think the market is underestimating the earnings growth of KGN with multiple marketing vertical's in early stages beginning to show signs of material earnings growth. In particular, if the business momentum continues, particularly in KGN's Exclusive Brand and Kogan Marketplace divisions, we see the potential for more material upgrades to consensus FY20/FY21 earnings forecasts. KGN is a strong business model, supported by a well known and strong brand awareness in Australia. Return on invested capital is very strong +50%. The model is essentially an online marketing machine to its large customer base and as such it has a low customer acquisition cost. The capital light, low cost distribution platform enables price leadership. Management, Ruslan Kogan (CEO) & David Shafer (COO), are founders of KGN and are aligned to shareholders with significant personal shareholdings.

Fundamentals: KGN has a $550m market capitalisation. KGN is trading on PER 27x FY19 and 22x FY20, reasonable multiples to pay for its strong organic earnings growth. KGN is trading at a 15% discount to our valuation and price target of $6.50/sh. Balance sheet is sound with zero debt and cash ~$30m

What could go wrong? Coming soon!