Openpay Group Limited

OPY Details

FY21 Key Results Highlights: Openpay Group Limited (ASX: OPY) is a Buy Now and Pay Later (BPNL) company payment solution provider.

• Signed major US Partnership with Kryiba: The main aim is to enter the US's largest B2B payments market and spread OpyPro globally, intending to capture over 2000 enterprise clients.
• Acquisition of Payment Assist Ltd.: Announced this year, the acquisition will lead in capturing the UK automotive market, which totals the Active plans to 993k, the revenue of $34.2mn and total transaction value of $416.8mn.
• Revenue Details: In FY21, the company reported revenues of $26mn, up 44% year over year. However, the company witnessed a decrease in revenue margin to 7.6% from 9.3%, owing to an increased mix in TTV in the Retail section.
• Funding Perception: The company employs a proactive approach towards funding, with the latest amount of ~71.2mn capital & debt structure, implying a strong cash position in FY22.
• Increase in Total Transaction Value (TTV): An increase of TTV by 47% is reported from $157mn in FY20 to $231mn in FY21.
• EBITDA Details: Reported EBITDA loss of $55.1mn in FY21 as compared to a loss of $30.1mn in FY20. Such an 83% increase in losses is due to the hike of 68% in Operating Expenses from last year.

Revenue Highlight (Source: Analysis by Kalkine Group) 

Key Risks: The company is exposed to credit and fraud risks, but it gets reduced due to its global expansion in the UK automotive segment. Besides, the globalisation of Openpay makes it more prone to changing government policies & regulations along with currency fluctuations risks in the international market.

Outlook: Looking ahead with the market expansion in the US & UK For FY22, Openpay is planning to go very strong in mergers & alliances domestically and internationally. It will have an impact on Group’s commercial profile, thus accelerating growth in various verticals and profitability. In addition, milestones of entering in $5.5tn US Buy Now Pay Later (BNPL) market due in FY22 and continued investment in existing core and innovative technologies like Epic Cause are in the cards.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last month, the stock has provided a return of 3.9% and is trading lower than the average 52-week price level band of $1.11 and $3.94. The stock has been valued using the Price/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at some discount to its peers’ median, considering its risks related to government policies & regulations, increase in EBITDA losses, etc. For the purpose of valuation, peers like Credit Corp Group Ltd (ASX: CCP), Money3 Corp Ltd (ASX: MNY), Eclipx Group Ltd (ASX: ECX), Moneyme Ltd (ASX: MME) and others have been considered. Considering the company’s rise in FY21 revenue, funds infusion, TTV & customers and various strategic alliances, current trading levels, and valuation, we give a “Speculative Buy” rating on the stock at the current market price of $1.305, as on 2 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

OPY Daily Technical Chart, Data Source: REFINITIV

Virtus Health Limited

VRT Details

FY21 Key Results Highlights: Virtus Health Limited (ASX: VRT) is a healthcare company providing day procedure, medical diagnostic and fertility and other assisted reproductive services (ARS).

• Buying Deal: Deal of $45mn of buying Adora Fertility and three co-located Day Hospitals has been signed with Healius Limited (ASX: HLS) on a cash and debt-free basis.
• Revenue Details: In FY21, the company reported revenues of $324.6mn, up 25.4% year over year.
• EBITDA Details: An increase of 44.2% in EBITDA ($84.1mn in FY21 Vs $58.3mn in FY20).
• Net Debt Reduction: an amount of $19.0mn has been paid, reducing the debt to $107.1mn at the end of FY21, leading to lower interest charges.
• Leverage Ratio Details: Down from 2.2x at the end of FY20 to 1.5x at the end of FY21.
• Investment Plans: To improve IVF success rates, deployment of funds in various segments like precision of Fertility Platform, establishment of new clinics and lab are planned for FY22 & FY23.

Revenue Highlight (Source: Analysis by Kalkine Group) 

Key Risks: The company’s expansion in countries like Ireland, Denmark, Singapore and UK, makes it more prone to risks related to changing government policies & regulations along with currency fluctuations risks in the international market. Due to the new COVID-19 Variant, the International ARS market has a setback due to lockdown happening in Australia and other international markets.

Outlook: With a debt-free purchase of Adora, Virtus eyes on cost and market capturing synergies, as the acquirer comes with 4 fertility clinics, 3-day hospitals and 11 specialists. Looking ahead with the growth in ARS demands and market expansion internationally, Virtus plans building an ecosystem of new operating models (capital light VaaS) and collaboration with start-ups.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the nine months, the stock has provided a return of 21.93% and is trading above than the average 52-week price level band of $3.36 and $7.47. The stock has been valued using the Price/Earnings multiple based illustrative relative valuation method and arrived at a target price with an upside of high double-digit (in % terms). The company can trade at some discount to its peers’ average, considering its risks associated with currency fluctuations and government regularity risks domestically and internationally. For the purpose of valuation, peers like Sigma Healthcare Ltd (ASX: SIG), Integral Diagnostics Ltd (ASX: MVF), Monash IVF Group Ltd (ASX: IDX) and others have been considered. Considering the company’s rise in FY21 revenue, debt reduction, global expansion, current trading levels, valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $6.42, down by ~3.31%, as on 2 September 2021.

VRT Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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