Kogan.com Share Price Booms As Company Moves into the Insurance Business

Shares of Kogan.com [ASX:KGN] are already up 15% this week. Today, the company announced plans to start selling insurance to their six-million-strong customer base.

Why is Kogan doing this?

Kogan.com was an Australian pioneer in internet shopping. It listed on the ASX a year ago, but was struggling to get any shareholder attention due to the weak retail environment and the looming Amazon threat.

However, in the past few months, there have been signs that the company is repositioning itself. The Kogan Travel and Kogan Mobile units are growing fast and, in June, the company also announced plans to provide an NBN service.

Many of these new units use a model of partnering up with a leading player, such as Vodafone in the mobile unit or Hollard Insurance for this new service. Kogan.com then rebrands and on-sells it through their extensive customer database.

All the Kogan units target the budget market with a ‘value for money’ approach.

What now for Kogan.com?

Investors certainly like this new strategic direction, and the share price has risen strongly on the back of it. It was as low as $1.50 in June, but now sits at $2.30 just a month later.

Last quarter they generated $9.9 million in cash, mainly from their traditional retail-goods business. So this is still ticking along nicely.

And with $32 million in cash, an established, cheap distribution channel and several exciting new opportunities ahead, Kogan.com seems to be making the right moves at the right time.

Ryan Dinse,
Analyst, Money Morning

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Ryan Dinse is a contributing Editor at Money Morning. He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur. With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle. Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.  


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