Company Overview - zipMoney Limited offers point-of-sale credit and digital payment services to consumers and merchants. The Company provides a range of integrated Retail Finance solutions to small, medium and enterprise businesses across various industries, both online and in-store. The Company offers its services primarily to the retail, education, health and travel industries. Its products include zipMoney and zipPay. zipMoney is classified as a continuing line of credit and generally applied to various ticket purchases where a promotional interest-free period is applied, between 6 to 24 months. zipPay is a no interest ever digital shopping account and generally applied to various ticket purchases, such as fashion, accessories, food and hospitality. It supports prime, near prime and emerging prime borrowers by providing those customers with a revolving unsecured line of credit to finance their transactions. Its platform utilizes a range of variables to deliver real-time consumer credit responses.

 


ZML Details
Ongoing expansion of digital payment platform and new partnerships for growth:zipMoney Ltd (ASX: ZML) recently announced about joining hands with Webjet (one of the Australia’s largest online travel agency), which will offer ZML’s interest-free payments on Webjet Exclusives. The travel and leisure sector is a core focus for ZML and the partnership with Webjet Exclusives is a part of the group’s vertical strategy. Further, with zipMoney, the travelers would now have the flexibility to ‘travel now and pay later’ interest-free for all their leisure plans booked through Webjet Exclusives. Harris Farm (a leading grocer) also selected ZML’s zipPay (digital wallet solution) for their online checkout as part of the grocer’s strategic payments’ engagement. Harris Farm has 22 stores and is growing an e-commerce business and the group intends to enhance the customer flexibility via ZipPay. ZML even announced the strategic partnership with Shopify, which is one of the world’s leading and most recognized e-commerce platforms with over 377,500 businesses globally. The partnership with Shopify would enhance ZML’s digital wallet solution, zipPay (online and in-store). During the third quarter (Q3) of FY17, the group had announced a strategic partnership with eWAY, which is a part of the US giant Global Payments. eWAY is the Australia’s largest online payment gateway and processes more than 25 per cent of all online payments. The partnership will see the roll out of the Zip digital wallet solution as a core offering to over 30,000 online retailers in Australia and millions of Australian shoppers. Moreover, ZML has announced a strategic partnership with Retail Directions, which is one of the leading providers of point-of-sale and retail technology solutions to Australian and International retailers. The partnership with Retail Directions further accelerates the growth of ZML, making the interest free solution available at point-of-sale (POS) in thousands of stores nationwide. An integration with Retail Directions’ eCommerce platform is also being planned. Additionally, with over 90% of all retail transactions taking place in-store, ZML continues to invest in both channel partnerships, as well as, optimizing the customer and retailer experience. Hundreds of stores now offer ZML in-store, and the feedback and conversion from the process has been very encouraging. ZML is now offered as a payment option at thousands of physical locations, nationally, where customers can transact using a PIN (payment code) while checking out.
 
Strong operational growth in the third quarter FY 17:During the third quarter (Q3) of FY 17, the group’s revenue grew 18% over the second quarter (Q2) of FY 17 to $4.6 million. Transactions on the platform rose over 66% during the quarter. This is due to a 49% increase in number of accredited merchants and a 62% increase in active customer accounts with 900 customers added to the platform each day. The merchant base grew due to the continued growth in the mid-market and SMB segments (at the back of continued investment in channel and platform partnerships). The transaction volume reached $61 million for the quarter (up 22% from Q2 FY17) with more than $200 million originated on the platform to date. The third quarter showed a major rise in the transactions, supported by the strong growth in zipPay-accepted retailers and an increased re-purchase rate across the entire Zip customer base. The group had added hundreds of stores to the marketplace and the product pipeline is strong across all vertical segments. Moreover, in the third quarter, ZML grew its receivables to $115 million, up 31% on the previous quarter, with $61 million of transaction volume. This had generated revenue of $4.6 million, which is due to the continued growth across the entire payments’ platform. The customer repayment profile has continued to remain healthy at 13% of opening receivables balance repaid each month. The reported arrears’ rate was 1.8% and bad debts were at 1.2%, which are both well below industry standards. The strong credit performance continues to validate ZML’s investment in its 100% owned proprietary credit and fraud decision technology. Additionally, during the third quarter of FY 17, the cash receipts from customers were $4.6 million. The cash outflows to interest paid has increased to $2.5 million ($1.8 million in Q2) in line with the increase in customer receivables in Q3 FY 17. The total cash flows from operating activities for Q3 FY17 resulted in cash outflows of $2.2 million. In addition, the cash at the end of the third quarter 2017 was $11.1 million with $7.1 million in restricted cash.
 

March 2017 Quarterly Key Measures Update (Source: Company Reports)
 
Strong organic growth in Pocketbook business:Pocketbook app has built a strong presence in Australia in the personal finance space with more than 325,000 users. The coverage of financial institutions has been increased and the business has been able to deliver real-time data-driven user highlights with features such as “While You Were Away”. ZML is making further improvements to drive next generation of product features.The group has also made heavy investments in the presentation layer, as well as API micro services to enable the platform to move beyond budgeting into proactive features. The app was voted as the #1 personal financial service by both industry and users in 2016.
 
Eying for greater share in the target market opportunity:ZML has increased its merchant numbers to over 3,200 across Australia. The group has continued to diversify its end-customer industries, including retail, food and hospitality, travel, health services and consumer electronics. Moreover, ZML has continued its push into the $15 billion travel and leisure sector with the onboarding of TripADeal, one of the Australia’s leading travel deal sites. The company continues to expand its presence within the travel sector and looks forward to updating the market with further partnerships. Overall, the group is now eying an increased market share within about a $100 billion target market opportunity in Australia across all segments.
 

Penetrating across major segments (Source: Company Reports)
 
Improving financial flexibility:During the third quarter of FY 17, ZML increased the size of its committed debt facilities to over $170 million (drawn $118 million) to support the continued growth of its receivables. Moreover, ZML is currently finalizing documentation and is on track to close an additional $200 million asset-backed financing arrangement with a Big 4 Australian bank in Q4 FY17. The new facility is expected to approximately halve the weighted average cost of capital of the current loan facility, leading to a significant direct contribution to ZML’s bottom line. Additionally, the group would refinance c. $75 million at closing with no prepayment penalty. With these efforts and accelerating growth in customers and merchants, ZML seems to be on track for a cash flow breakeven in FY18. 

Continual Growth in Merchants’ and Customers’ Base (Source: Company Reports)
 
Stock Performance:ZML has a major first mover advantage for disrupting the consumer finance space with a fully digital offering and has already built a strong track record. The group’s 100% owned proprietary technology leverages big data to offer a differentiated product with high barriers to entry. The group has a scalable, ‘nextgen’ technology payments’ platform that is capable of providing a support across the entire payments’ ecosystem.Accordingly, the group is targeting several segments in Australia with major focus on Health and Travel. The group is also uniquely positioned to onboard a consumer at checkout, regardless of the transaction size, and is thus constantly strengthening their presence in the retail space. ZML, through its retailer base, has originated more than $200 million on their platform till date. The group has more than 500,000 financial users across the entire group. Meanwhile, the group has planned a pipeline of lighthouse brands which would drive their quality and growth on the platform. ZML stock has fallen over 25.7% in the last six months (as of May 22, 2017) owing to volatile environment, and is now available at attractive levels. We give a “Buy” recommendation on the stock at the current price of $ 0.62
 

ZML Daily Chart (Source: Thomson Reuters)

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