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

Integration of Zip’s products and services across Westpac’s network: zipMoney Limited (ASX: ZML) has secured a $40 million strategic investment from Westpac Banking Corporation by way of a private share placement. Westpac and Zip have also entered into a strategic relationship which allows both to explore the integration of Zip’s products and services across Westpac’s network throughout Australia. As part of the strategic relationship, it will explore other initiatives including the provision of currently in development business-to-business products and services to Westpac. The WBC strategic investment will be by way of a $40 million ordinary equity investment comprising the subscription of 49,382,716 fully paid ordinary zipMoney shares at a price of $0.81 per share. In addition, WBC will be granted 9.8 million Performance Options with an exercise price of $0.81 per share. The proceeds from the investment will be used to accelerate Zip’s growth plans and the development of new products and technologies, including enhancing its data science and proprietary decisioning capabilities. This investment will also provide additional equity capital to support the continued growth in the zipMoney loan book, and combined with the recent $260 million asset-backed securitization warehouse program implemented on 25 May 2017, provides Zip with a scalable funding platform, from which to capitalize on the present market opportunity.
 

$100bn Market Opportunity in Australia; (Source: Company reports)

Robust performance during Q4FY17: During Q4FY17, the company has recorded a revenue of $5.6m million and $17.0 million YTD (unaudited). Transactions on the platform increased by 59% over the quarter, reflecting a 39% increase in merchants and an 52% increase in customer numbers. Transaction volume reached $86 million for the quarter (up 42% from Q3 FY17) with close to $300 million originated on the platform to date. Receivables increased 33% on Q3 FY17 to $152 million, and bad debts stood at 1.86%. During the quarter, the company witnessed the momentum in network gaining with customer numbers up more than 50%. Its investment in strategic commercial partnerships has been a core enabler of this strategy, and continues to invest in its proprietary technologies around fraud and credit tech, as well as digital payment services.


Q4FY17 Financial performance; (Source: Company reports)

Investing in core intellectual property, and growing business segments: During the quarter, robust growth continues for the Personal Financial Management (PFM) app, organically growing to 365,000 users, a 12% increase over the quarter. A key development over the quarter was the continued improvement of Pocketbook’s industry-leading transaction analysis and categorization engine, which are already delivering a significant 15% increase in accuracy. Further enhancements are expected over the coming months through continued investment in machine learning and natural language processing. This key group-wide competency directly contributes to Zip’s proprietary, real-time credit and fraud decision automation platform. Importantly, Zip increased its merchant numbers to over 4,400 across Australia with thousands of locations now accepting Zip. Further, the Company continued to diversify its end-customer industries, including retail, food and hospitality, travel, health services and consumer electronics – demonstrating the versatility of Zip’s core offerings. During the quarter, the company has deployed new machine learning algorithms resulting in a 50% increase in automated decisions within selected categories. Additionally, it has implemented innovative technologies enabling risk analysts to more effectively identify hidden relationships between customer accounts, whilst proactively detecting suspicious transaction behavior. Further optimization of Zip’s Big Data infrastructure increasing speed-to-market to rapidly deploy new AI/machine learning capabilities and analytics across all business units.


Payment platforms integrations and channel partnerships; (Source: Company reports)

Pacific Smiles joins zipMoney interest-free payments platform:  Pacific Smiles Group (ASX: PSQ), one of Australia’s largest branded dental networks operating in a $9 billion industry, has joined the zipMoney interest-free payments platform. Pacific Smiles has over 350 dentists provide approximately 600,000 dental appointments each year across 70 centers’ nationwide. It offers a range of general, family and cosmetic dental treatments including implants as well as specialist services such as orthodontics. The Zip offering supports patients in choosing the best dental care available, by paying flexibly over time in monthly, interest-free instalments.  The Zip payments solution has been designed to support early intervention and compliance for treatment plans, the cornerstone for providing the best possible dental care. Pacific Smiles represents the addition of another major enterprise account onto the platform, and follows robust growth, specifically in the health sector since the beginning of 2017.


Growing merchant numbers; (Source: Company reports)

Expansion of digital payment platform and new partnerships for growth: Recently, zipMoney Ltd partnered 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. 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). 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.


The digital wallet is becoming the fast payment choice; (Source: Company reports)
 
Cost of debt continue to reduce:  During the quarter, cash receipts from customers were $5.7 million, while staff, administration and corporate costs were $5.3 million ($4.2 million in Q3), reflecting the full run-rate costs invested over the previous quarters in people and technology. Cash outflows in respect of interest paid increased to $4.0 million ($2.5 million in Q3) commensurate with the increase in customer receivables. As more receivables are funded out of the lower-cost, NAB-led facility, the Company expects the cost of debt to continue to reduce. Total cash flows from operating activities for Q4 FY17 resulted in cash outflows of $3.9 million. During the period, Zip increased the size of its committed debt facilities to $413 million (drawn $162 million) to support the continued growth of its receivables. At 30 June, the facility totaled $33.4 million of which $20.4 million was drawn (including $6 million as working capital). Notably, Zip continues to enjoy strong economies of scale as a result of the ongoing investment in the Company’s 100%-owned proprietary credit and fraud decision technology. The Company holds $6.6 million in cash, and $12.6 million in restricted cash at the end of the quarter.
 

Zip brand continues to expand its presence; (Source: Company reports)

Stock Performance: The stock has moved up 15% in the past five days (as of August 08, 2017) after securing the $40 million strategic investment from Westpac Banking Corporation. During Q4FY17, ZML has originated close to $300 million on the platform with 33% increase in receivables to $152 million, reflecting continued growth across the entire payments platform. Further, the Company continued to diversify its end-customer industries, including retail, food and hospitality, travel, health services and consumer electronics. Given the robust performance and expansion of payment services in growth segments, we give a “Buy” recommendation on the stock at the current price of $ 0.770
 

ZML Daily Chart (Source: Thomson Reuters)
 

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.