Sezzle Inc.

SZL Details

Spotlight on Q3FY21 Results: Sezzle Inc. (ASX: SZL) is a fintech company, which operates a payment platform. SZL was listed on ASX in July 2019.

• The company inked a deal with Alliance Data Systems Corporation, which is expected to offer long-term loans through SZL’s merchant network.
• Underlying Merchant Sales in 3QFY21 maintained their growth trajectory and reached US$460.7 million, up by 101.9% on pcp basis. Total income for the quarter depicted a rise of 78.9% on pcp to US$28.5 million, as large enterprise merchants became a more significant percentage of the SZL’s transactions.
• SZL lowered its provision for uncollectible accounts receivable and witnessed a decline of more than 100bps during the quarter to 2.3% of UMS compared to 3.4% of UMS in the previous quarter.
• As of 30 September 2021, SZL recorded US$46.89 million as total cash, compared to US$60.027 million reported as at 30 June 2021. Cash receipts from customers went up by 10.7% on a sequential basis.

 Balance Sheet Data, Analysis by Kalkine Group

Key Risks: The company’s operational and financial performance could be impacted by failure done by counterparties in fulfilling their obligations. SZL is exposed to a more complex regulatory environment as it operates in financial transactions. Any failure in maintaining compliance could lead the business to fines, penalties, etc

Outlook: The company continues to witness encouraging activity in its international markets. The company remains well placed to increase its consumer and merchant engagement. It intends to carry out numerous campaigns in 4Q21, that will aid consumers to shop the top deals, drive traffic and increase consumer engagement for its merchant partners.

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

Source: 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: The stock of SZL gave a negative return of ~57.79% in the past three months. The stock is currently trading close to its 52-weeks’ low level of $2.47. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at some discount to its peers, considering the uncertainties led by COVID-19 restrictions, low-profit generation efficiency, and high credit risk potential, etc. For valuation, a few peers like Data#3 Ltd (ASX: DTL), Appen Ltd (ASX: APX), Link Administration Holdings Ltd (ASX: LNK) and others have been considered. Considering the aforesaid factors, improved merchant network, higher customer base, strategic deals, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $2.50, down by ~2.724% as on 20 January 2022.

SZL Daily Technical Chart, Data Source: REFINITIV 

Laybuy Group Holdings Limited

LBY Details

What Investors Need to Know About 1HFY22 Results: Laybuy Group Holdings Limited (ASX: LBY) is a fintech company and is engaged in buy now, pay later (BNPL) services in the markets of New Zealand, Australia and the UK.

• Statutory loss during the period stood at NZ$22.6 million in H1FY22, compared to a loss of NZ$26.4 million reported in the pcp.
• Active customers grew by 57% to 889k in H1FY22, compared to 568k reported in the year-ago period.
• In 1HFY22, the company reported annualised gross merchandise value (GMV) of NZ$782 million, depicting an increase of 60% year over year.
• The launch of LBY App Exclusives (Affiliate Marketing Network) remains on a growth trajectory subsequent to the release in the UK market. In turn, this provided customers with access to over 170 new household brands and aided LBY in adding over 5,000 merchants in a broad range of verticals in the near term.
• LBY arranged a new debt facility of EUR30 million with US specialist lenders Partners of Growth (PFG) in complementing UK loan book growth. There has been an improvement in the cash position to NZ$22.98 million as of 30 September 2021, compared to NZ$15.5 million as of 31 March 2021.

GMV Trend (Source: Analysis by Kalkine Group)

Key Risks: On the flip side, rising variable costs and high fixed costs, owing to locally authorised lockdowns and changing consumer spending habits, may weigh on the financial performance. Further, merchant default and merchant fraud risks remain a potential concern for BNPL companies.

Outlook: The company’s differentiated offering and growing brand awareness remain on track to deliver robust growth rates across all regions. It focuses on improving operational efficiencies and merchant and consumer experience and aims to increase user engagement. The company remains upbeat on its prospects and expects to achieve annualised GMV of NZ$1 billion for FY22. Revenue guidance for FY22 updated to 60-70% growth over FY21.

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

Source: 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: The stock of the company has been corrected by ~74.86% in the past nine-months. Currently, the stock just recovered from its 52-week low level of $0.15. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount as compared to its peers, considering the impact of COVID-19 pandemic, and negative profitability, etc. For the purpose of valuation, peers such as Openpay Group Ltd (ASX: OPY), EML Payments Ltd (ASX: EML), Douugh Ltd (ASX: DOU) have been considered. Given the remarkable growth in GMV, strong liquidity position, rise in active customers, current trading levels, upside in valuation, along with key risk associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.22 as on 20 January 2022.

LBY 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 on 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 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 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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