Investors may get another chance to repeat the golden share price run of Kogan.com Ltd (ASX: KGN) as one of its closest rivals is planning on an initial public offer (IPO).
The listed online shopping site has surged 260% over the past 12 months, making it one of the best performers on the market with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) “only” climbing 10%.
Those who bought shares in Kogan at its IPO have seen a more than four times return on their investment and privately-owned Catch Group has reportedly hired investment bankers to help it prepare for its own market debut, according to the Australian Financial Review.
It should be a pretty easy sell for the Catch Group IPO given Kogan’s stellar run and investors should welcome the new listing as it will provide more choices to investors. Our local market is a pretty shallow pool when it comes to pure online retailers.
We don’t have the likes of Alibaba Group or eBay Inc on the ASX to invest in to benefit from the tectonic structural change in the retail industry.
Having Catch Group on the market won’t be a game changer for retail investors, but at least it could offer a diversification option to Kogan as the likes of traditional retailers Harvey Norman Holdings Limited (ASX: HVN), JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL) are struggling to hold their ground against online giants like Amazon.com.
The AFR reports that the IPO could give Catch Group a market cap between $200 million and $300 million, and the new share offering could happen before the end of the calendar year.
Catch Group sells a wider range of products than Kogan, which focuses on electronics although it has broadened its product range. Catch Group sell products across beauty, fashion, groceries, sports, electronics, etc, at low prices (like all online e-tailers).
It would be interesting to see how Catch Group can use the public market to fund its expansion of its groceries business to steal market share off Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd’s (ASX: WES) Coles supermarkets – both of whom have expanded aggressively into online sales.
Catch Group is believed to have reported a loss of $17.8 million in FY17 but that’s because it wrote down the value of its intangible assets by $25 million.
I would be surprised if Catch Group’s prospectus doesn’t paint the company as being profitable on an underlying basis and cash flow positive for the latest financial year.
But retail is a trickly sector to invest in for FY19 given the falling housing market, low wage growth, intense competition and high household debt.
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.