3 Buy Now Pay Later Stocks – EML, APT, SPT

 

Stocks’ Details
 

EML Payments Limited

 
Top-line Grew by 37% on y-o-y Basis:EML Payments Limited (ASX: EML) provides services like pre-paid financial cards to both consumers and business. Recently, the company informed its agreement with NSW Health for branded General-Purpose Reloadable card programs for employee Salary Packaging.
 
FY19 Operational Highlights for the Period ended 30 June 2019: EML declared its full-year result, wherein the company reported revenue at $97.2 million, up 37% on y-o-y basis. The top-line growth was aided by business growth across all segments followed by growth from the acquisition.Gross Debit Volume (GDV) stood at $9.03 billion, depicting a growth of 34% on y-o-y basis. EBITDA stood at $29.1 million, increased 40% on pcp while gross margin was unchanged at 75% in FY19. Cash Overheads declined to 45.1% of revenue from 45.8% in FY18. The company reported $0.6 million of acquisition costs, principally relating to Presend and PerfectCard. Depreciation & Amortisation stood at $10,267 million, up 16% mostly in relation to the amortisation of intangibles arising upon acquisitions.  The business reported a net profit of $8.450 million, as compared to $2.208 million in FY18.
 
 

 
FY19 Income Statement Highlights (Source: Company Reports)
 
 
Valuation Methodology:Enterprise Value to Sales based Approach 

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation:The stock of EML is trading at $5.290 with a market capitalization of $1.68 billion. The stock made a 52-week low and high of $1.363 to $5.420 and currently, the stock is trading at the upper band of its 52-week trading range. The stock has delivered stellar returns of 28.35% and 75.29% in the last three months and six months, respectively. The company offers services with instant and secure payment solutions that help to connect the clients with their respective customers. The company reported exuberant growth in FY19 aided by robust growth in GDV. Considering the aforesaid facts, we have valued the stock using Enterprise Value to Sales based relative valuation method and arrived at a target price with lower double-digit upside (in % terms). Hence, we recommend a “Hold” rating on the stock at the current market price of $5.29, up 2.519% as on 04 February 2020.
 

Afterpay Limited

 
Active Customer Grew by 137% on y-o-y Basis: Afterpay Limited (ASX: APT) provides services ‘buy now pay later’ to its consumers. On 04 February 2020, the company informed that it would release its financial Results for the six-month period ended 31 December 2019 on Thursday 27 February 2020.
 
Key Highlights for 4-month period ended 31 October 2019: APT came up with four-months business highlights, wherein the company reported underlying sales of $2.7 billion, up 110% on y-o-y basis. The growth was primarily driven by robust customer growth of 137% on y-o-y basis.During the period, active customers and active merchants stood at 6.1 million and 39,450, respectively. On an average, the business reported onboarded more than 15,000 new customers per day for the month of October 2019, which represents its largest customer acquisition month. Within the ANZ segment, Afterpay in-store is available at ~29,000 shopfronts, up from 23,600 from June 2019. Recently, the company has entered into a collaboration with Bupa Dental, Australia’s largest corporate dental group. The above deal is likely to provide a database of more than 500,000 patients they treat each year across more than 200 dental practices across Australia. During the period, the company entered a strategic partnership with Mastercard in the Australian market to scale business and deliver services to merchants with better efficiency and flexibility. Within the US market, the company reported strong growth underlying merchant sales stood at $0.7 billion during the time period.


Four Month Operating Highlights (Source: Company Reports)
 
Stock Recommendation:The stock of APT is trading at $39.880 with a market capitalization of $10.07 million. The stock made a 52-week low and high of $16.170 to $39.98 and currently, the stock is trading at the upper band of its 52-week trading range. The stock has delivered returns of 39.01% and 61.96% in the last three months and six months, respectively. The business reported robust growth across each of its segment and the recent strategic collaborations are likely to give improved business prospects in the coming quarters. Considering the recent price movements, trading levels, we are of the view that most of the positives are already factored in at the current juncture. Hence, we give an “Expensive” rating on the stock at the current market price of $39.880, up 4.782% as on 4^th February 2020, taking cues from the released 1HFY20 financial results. 
 

Splitit Payments Ltd

 
Average Order Value Increase by 11% on q-o-q: Splitit Payments Ltd (ASX: SPT) is a service provider of credit card-based instalment solution to businesses and merchants.
 
Q4FY19 Operational Highlights for the Period ended 31 December 2019:SPT announced its quarterly highlights, wherein the company reported Merchant Sales Volume (MSV) at US$27.1 million, up 20% on q-o-q aided by a robust of 35% from the North America segment. Revenue was down by 7% from the previous quarter at US$433K. The company reported 12 Month Active Merchants at 386, up 17% from the previous quarter driven by a strategic focus on merchants with higher average order value and greater product-market fit. During the quarter, the business reported addition of prestigious merchants like Mobvoi, Chili Technology, Eight Sleep, Ace Marks, Nili Lotan, etc. The company reported an average order value of US$863, depicting an increase of 11% from Q3FY19.
 

 
 
Stock Recommendation:The stock of SPT is quoting at $0.535 with a market capitalization of $177.57 million. The stock made a 52-week low and high of $0.395 to $2 and currently, the stock is trading at the lower band of its 52-week trading range. The Company has accelerated its ongoing efforts to rationalise its merchant base and prioritise on high-value merchants with a strong product-market fit. The stock is available at a price to book value of 3.5x on its trailing twelve months basis, as compared to industry (Software & IT Services) average of 4.4x. The stock has delivered mixed returns of -42.71% and 15.15% in the last three months and six months, respectively. Considering the recent price movements, trading levels with decent customer growth and valuation, we give a “Speculative Buy” rating on the stock at the current market price of $0.535, down 6.14% as on 4^th February 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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