Afterpay Touch Group Limited

Robust Increase in Underlying Sales: Afterpay Touch Group Limited (ASX: APT) had generated underlying sales of $2.3 billion in 1H FY 2019 (six months ended 31 December 2018) reflecting a rise of $1.4 billion or 147% on the prior comparative period (or pcp). The company had witnessed a strong half year as there has been expansion in the new markets, announcement of key new partnerships and verticals, worked towards growing revenue and reducing the gross losses. The company’s total income amounted to $112.3 million in 1H FY 2019 reflecting the rise of 85% on the YoY basis mainly because of robust growth in Afterpay underlying sales which got partially offset by the impact of first-time accounting standards adoption.


1HFY19 Key Financial Metrics (Source: Company Reports)

What to Expect from APT Moving Forward: The company had stated that continued growth would be requiring increased investment strategies as the company has been focusing towards value gained from the customer and merchant acquisition. The company has an ambitious 3-year plan in which the group intends to achieve more than $20 billion in GMV by FY22 end. The company has a robust balance sheet which might support it in expansion plans.

Stock Recommendation: Considering the stock performance, APT’s stock has witnessed the rise of 21.85% in the time span of previous 6 months while, in the past three months, it has encountered the rise of 63.99% pushing the stock slightly towards the 52-week higher level. Thus, it can be said that the company’s stock has discounted all the key growth catalysts at the current juncture. Also, from the valuations perspective, the company’s stock seems to be slightly overvalued as its EV/Sales ratio stood at 23.4x which is higher as compared to the industry median (professional and commercial services) of 2.3x. The company’s P/B ratio stood at 13.8x which is also higher than the industry median of 2.0x.  

Therefore, considering the stock’s premium valuations coupled with its trading level which is slightly towards the 52-week high, we consider that the stock is expensive at the current price of A$19.630 per share and advise the market players to make an entry once it witnesses correction in the upcoming trading session.
 

Splitit Payments Ltd

Significant Rise in Revenues: As per preliminary final report for the year ended December 31, 2018, Splitit Payments Limited (ASX: SPT) posted revenues amounting to US$789,920 from the continuing operations in FY 2018 which implies the rise of 203% on the YoY basis demonstrating the company’s growth throughout key performance metrics. Also, the company announced that Mr. Andrew Pipolo would be leading Australian and Asia Pacific growth strategy.

   
FY18 Key Metrics (Source: Company Reports)

Also, the company has named Mr. Nathan Mairs to drive rapid growth in North America and beyond. Mr. Nathan happens to have a rich amount of knowledge and experience when it comes to selling payment solutions to large merchants. He has also delivered impressive results for Klarna.

Onboarding Of New Merchants Might Support SPT: The company has been onboarding new merchants and its global pipeline is improving with both direct and distribution channels shaping up to provide strong results through 2019 and beyond. SPT added that there are opportunities present all over the world as existing and new verticals are embracing payment disruptors.

Stock Recommendation: Considering the recent performance, SPT’s stock has witnessed a rise of 35.86% in the past one month while in the span of the previous 5 days it has increased by 39.73%. As a result of these increases, the company’s stock is trading towards the 52-week higher level. Therefore, it can be assumed that the stock price has discounted all the important growth catalysts in its current trading level.

Therefore, it seems like the company’s stock is expensive at the current market price of A$1.565 per share and, thus, we advise the market players thatthey should wait for a few more trading sessions to get the better levels for entry.
 

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