What: Shares in online retailer KOGAN.COM DEF SET (ASX: KGN) slumped 17% on their first day of trading since their highly-anticipated initial public offering (IPO).
Investors who partook in the float received shares at a price of $1.80 each. At the close of Thursday's trading session, the stock had slipped to finish at $1.50.
So What: Kogan is the latest in a string of online retailers to undertake an IPO on the ASX but unlike some of its peers, Kogan has a history of profitability.
In many ways it is better to compare the company to its bricks-and-mortar retail peers JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN), rather than to other online only retailers as ultimately this is who Kogan is competing against.
Now What: Kogan's shares have bounced back just 2% at lunchtime on Friday, but even at these levels conservative investors may not be interested.
The group has revenues of around $200 million which is only a very small share of the consumer electronics market. With a highly-visible brand and the recent acquisition of the Dick Smith online store, there is potential for solid growth in sales to be achieved.
Indeed, the prospectus is forecasting just that – with a rise in sales to around $240 million in financial year (FY) 2017.
However, at the bottom line, margins remain razor thin. FY 2017 net profit after tax is forecast to be $2.5 million, yet even at today's share price, investors would be paying around $143 million for those profits.
