Kogan to raise $115 million as it hunts for new acquisitions


Kogan’s most notable past acquisitions have been replica furniture retailer Matt Blatt, which it acquired for $4.4 million in May, and the digital assets of collapsed electronics retailer Dick Smith, which it snapped up for $2.6 million in 2016.

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With numerous businesses struggling amid the coronavirus pandemic, Kogan told shareholders there were “multiple opportunities” presenting themselves, but the business would focus on acquisitions which expanded Kogan’s customer base or broadened its offering.

“Kogan.com is committed to making the most in-demand products and services more affordable and accessible,” chief executive and founder Ruslan Kogan said.

“We are now in a better position than ever to take advantage of growth opportunities. Our low cost of doing business and digital expertise have put us in the driver’s seat to capture market share as the retail industry undergoes significant change.”

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Kogan’s revenue soared as more and more customers began to shop online during the pandemic and is now up 35.1 per cent to $674 million for the financial year to date. Earnings have similarly increased, coming in at $41.8 million for the same period, a 54 per cent rise.

This sales performance has boosted the market capitalisation of the retailer to $1.2 billion, making it worth as much as the combined value of Myer and David Jones, two of Australia’s oldest and most well-known retailers.

Shareholders have lauded the company’s 6 per cent cost-of-doing-business to sales ratio as one of its greatest strengths, with analysts claiming it is “one of the most efficient retailers in Australia”.

Mr Kogan and chief financial officer David Shafer are not able to participate in the $100 million placement, but both will take up their full entitlements in the $15 million share purchase plan. The duo, who founded the business, own 22 per cent and 8.5 per cent of the retailer respectively.



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Kogan worth as much as Myer, DJs combined


“We’ve got this environment now where our business leaders are starting to talk about e-commerce and online…and that leads to a changing of the guard,” he told The Age and The Sydney Morning Herald.

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“There’s definitely a lot of businesses out there that have enjoyed very cosy trading conditions, but customers are voting with their wallets and it’s going to change.”

The company has performed better than any other on the ASX’s All Ordinaries index since the market plunged on February 20, up a remarkable 140 per cent. This has boosted the value of Mr Kogan’s own 22 per cent stake in the company to around $265 million, and co-founder and chief financial officer David Shafer’s 8.5 per cent stake to around $100 million.

While some of this success can be attributed to Kogan’s online-only positioning in a world moving rapidly towards e-commerce, analysts have also picked out the company’s record-low cost of doing business (CODB) as a major selling point for investors.

Owen Humphries, analyst at Canaccord Genuity, told clients earlier this year at Kogan’s half-year result the business was “one of the most efficient retailers in Australia”, with a CODB to gross sales ratio of just 6 per cent.

This puts Kogan at under half of electronics retailer JB Hi-Fi’s 15 per cent CODB ratio, long considered one of the best in the country, and in line with global online retailers such as eBay and JD.com.

Ruslan Kogan, founder and CEO of retail website Kogan.com.Credit:Wayne Taylor

Major Kogan shareholder Greencape Capital has been a beneficiary of Kogan’s share price performance, with the company amassing much of its stake in August 2018 when the stock hovered around $6.10. Since then, the value of Greencape’s stake has more than doubled, up around 113 per cent.

Greencape fund manager Steven Haralambidis told The Age and The Sydney Morning Herald the fund had backed Kogan thanks to its “laser-like” focus on cost.

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“Their office is at the back of a random car park in South Melbourne, and instead of a receptionist there is a tablet. Any spend the company undertakes is scrutinised, and in the case of marketing, is closely analysed from a return on investment perspective,” he said.

“We like that this is a founder-led business, with management retaining a significant stake in the company. This means there’s more alignment with the minority shareholder base than the typical listed company.”

Mr Haralambidis said the stock has had a good run, but says it could rise further as the market better appreciates the potential in Kogan’s third-party marketplace platform, which he believes could challenge major players such as eBay.

As Australia’s retailers rush to re-tool their online offerings and shrink their bricks and mortar footprints, Mr Kogan isn’t worried about competition. Instead, he welcomes the e-commerce rush, saying it only serves to direct more shoppers to his platform.

“All of those stores are helping us by training people that shopping online is where you should be looking,” he said. All of a sudden, all of their ads are telling people to start going online,” he said.

“The more people that start their purchase experience online, who compare prices and look around…the bigger our business is going to get.”

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