Kogan.com - set to drive operational leverage

Annual sales in the Australian Retail Market were estiamted at $266b in CY15, and are expected to grow at a ~5% CAGR from CY15-CY19. The Online Retail Market was valued at $17b and is forecast to grow at an 11.5% CAGR over the same period. Kogan.com is the most visited Australian Pure Play Online Retail website, with a higher Australian traffic ranking than any of its online retail competitors. It offers its more than 2.5m customers access to over 28,000 product SKUs sourced from a large and diverse supplier group. The company is expected to report a gross profit CAGR of ~22% pa over FY16-FY19 with upside stemming from the launch of new product initiatives (Travel, Mobile, Dicksmith.com.au etc.). Given its large and growing active user database, we see opportunity in continuing to offer new verticals (Insurance, Energy etc) while also endeavouring to be the price leader in a fast growing and large addressable online consumer market. We initiate on KGN with a price target of A$2.16ps using a DCF valuation methodology. You can read Canaccord's initiation report here: (VIEW LINK)


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