The ASX small-cap share Kogan.com Ltd (ASX: KGN) has been chosen by the fund manager Wilson Asset Management (WAM) as a leading ASX growth share with a lot of potential.
In the past month, the Kogan share price has risen by around 40%, and in the past year, by 75%.
Most readers will probably already know that Kogan.com is an Australian online retailer. Households can get a number of other services from Kogan including different insurances, mobile plans, credit cards and energy. It also owns the online New Zealand business called Mighty Ape.
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What the fund manager likes about the ASX small-cap share
WAM liked the latest business update from the company, which highlighted continued profit improvement in the first half of FY24.
The ASX small-cap share's gross profit saw growth of 42.1% to $89.5 million, thanks to an expanding share of platform-based sales.
The fund manager also pointed out that Kogan.com has been maintaining a strong financial position, with a cash balance of $83.3 million, despite using $17.2 million in the Kogan share buyback initiative.
Another positive for WAM was that the Kogan First membership saw growth to over 466,000 subscribers as at 31 December 2023, which was a 15.3% increase year over year.
The fund manager suggests that more loyal members can provide the company with an expanding recurring earnings profile going forward that "can contribute to a [Kogan] share price rerating".
What else did Kogan report?
It said its gross sales of $445.4 million reflected a decline of 5.6% year over year following "optimisations" to the quality of revenue and focus on platform-based sales, which resulted in a "significant reduction in inventories year over year". Platform-based sales for Kogan.com grew to 62.8% of gross sales, with a key contributor being the new Kogan.com advertising platform.
The ASX small-cap share's earnings before interest, tax, depreciation and amortisation (EBITDA) was $19.3 million for the FY24 first half, compared to a loss of $23 million in the FY23 first half. Earnings before interest and tax (EBIT) in HY24 are expected to show a positive $11.8 million, compared to an EBIT loss of $31.3 million in HY23.
Reporting date
The company is expecting to release its complete half-year result on 26 February 2024.
