Laybuy Group Holdings Limited

LBY Details

Laybuy Group Holdings Limited (ASX: LBY) is a fintech company providing buy-now-pay-later services to over 10,000 retail merchants in New Zealand, Australia, the UK, and the USA.

Results Performance for the First Quarter Ended 30 June 2021 – Q1FY22

• Gross Merchandise Value (GMV) rose to NZ$184 million in Q1FY22, or annualized GMV of NZ$738 million, up 58% YoY, where the UK GMV more than doubled, reaching annualized GMV of NZ$398 million, up 107% YoY, excluding the impact of Fx movements between NZ$ and GBP.
• Group income stood at NZ$10.4 million in Q1FY22, up 70% YoY and up 6% QoQ, and net transaction margin (NTM) stood at 2.0% for Q1FY22, up from 0.5% YoY.
• Active Customers were up by 356,000 YoY in Q1FY22, reaching 829,000 customers, where UK active customers were up by 143% YoY.
• Active Merchants were up 4,800 YoY in Q1FY22, reaching over 10,000. UK active merchants up 424% YoY.

Key Data (Source: Company Reports)

Recent Update:

• As per the release dated 26 August 2021, the company advised that 1,016,793 fully paid ordinary shares that are subject to voluntary escrow arrangements is expected to be released from voluntary escrow on 4^th September 2021.

Key Risks:

The business of the company is highly regulated and any delay in receiving any approval could significantly impact the operations and finances of the company. Further, the company is also exposed to customer defaults which if grows beyond the company’s comfort level, will negatively impact the operating performance.

Outlook:

The company is extending its focus on accelerating the growth momentum in the UK market, supported by funds raised in Q1FY22, while strengthening its strong position in ANZ. The affiliate marketing network agreement with Rakuten, Awin, and Sovrn is anticipated to further strengthen GMV growth as the company is closely tracking GMV to exceed NZ$1 billion during FY22.

Meanwhile, Tap to Pay will extend its momentum in the UK market for existing and new merchants, as an in-store payment solution.  Besides, the company is in the process of closing merchant agreements with Boohoo group brands including Debenhams, Dorothy Perkins, and more which could accelerate the pace of revenue generations, further.

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

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation:

The stock has made a 52-week low and high of $0.415 and $2.30, respectively and is currently trading below the average of 52-week high-low range.

The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and  a target price with the potential of low double-digit (in percentage terms) upside has arrived. The company might trade at a slight premium to its peers’ average, considering that the development in merchant acquisition from inbound  inquiries from SMEs has extended to a new level, that is expected to support GMV growth.

Considering strong cash position, current trading levels, and positive outlook, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.52 per share (Time: 3:52 PM (GMT+10), Sydney, Australia) on 30^th August 2021.  

AMA Group Limited

AMA Details

AMA Group Limited (ASX: AMA) is one of the market leaders in the Australian and New Zealand autobody repair industry, vehicle aftercare, and accessories market.

FY21 Performance – For the Fiscal Year Ended 30 June 2021 

• Total revenue and other income from continuing operations stood at $919.9 million, up 11% YoY and normalized pre-AASB 16 EBITDAI stood at $71.5 million, up 35% YoY. The rise in revenue and EBITDAI was primarily driven by the benefit of full twelve-month trading for acquisitions such as Capital S.M.A.R.T and ACM Parts.
• Net debt reduced by $53.8 million (24%) to $173.3 million as of 30 June 2021 with strong liquidity levels at $57.7 million in undrawn facilities. Cash and debt both fell due to the $102.5 million repayment of debt from sale proceeds and cash

Financial Snapshot (Source: Company Reports) 

Outlook

As per the result presentation released on 24 August 2021, the company is focused to develop commercial relationships with customers for a longer time horizon. Further, the company visualizes a strong opportunity for organic growth, driven by ~180 sites and a $1 billion business turnover. Currently undertaking a capital structure review to reduce leverage and improving on operating performance. Capital structure review is also aimed at managing short-term disruptions caused by the COVID-19 and positioning itself for growth. The company could undertake capital markets initiatives to strengthen balance sheet flexibility, diversify funding sources and extend the duration. Importantly, the banking syndicate remains supportive and has decided to covenant waivers through to 31 December 2021.

Key Risks

The company continues to work with local regulatory authorities to minimize the risk to the environment, reduce waste and ensure compliance with regulatory requirements. Further, the company is exposed to credit risk, and liquidity risk, and market risks such as foreign exchange risk and interest rate risk.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using a P/E multiple based illustrative relative valuation method and  a target price with the potential of low double-digit (in percentage terms)upside has arrived. The company might trade at a slight discount to its peers’ average, considering a lower Asset Turnover at 0.73x in FY21 versus 0.90x in FY20 and a reduced fixed asset turnover at 2.25x in FY21 versus 3.29x in FY20. However, the company is possessing a decent outlook as well as shorter cash conversion cycle in FY 2021 as compared to FY 2020.

Considering the rise in vehicle volume near to pre-Covid levels and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.435 per share, down by 2.248% on 30^th August 2021.

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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