Stocks’ Details

Splitit Payments Ltd

New Partnership Agreement: Splitit Payments Ltd (ASX: SPT) provides credit card-based instalment solution to business and merchants. The market capitalisation of the company stood at ~A$169.14 Mn as on 23^rd July 2019. Recently, the company via a release dated 22^nd July 2019 announced that it has entered into 3-year partnership agreement with GHL ePayments Sdn Bhd, which is a part of leading payment service provider, GHL Systems Berhad. The objective behind the partnership agreement is to offer SPT’s instalment solution to over 2,000 online merchants in Thailand, Malaysia, the Philippines and Indonesia. As per the agreement, the merchants of GHL Systems Berhad would be able to offer their customers the SPT’s instalment payment solution to pay for the online purchases with an existing credit card and, thus, splitting cost into interest and fee-free monthly payments.

In other updates, the company also announced that it inked an agreement with Kogan.com Limited. The agreement has been signed to provide the company’s unique instalment payment solution for online purchases in Australia via the Kogan.com website.The following picture provides an idea of credit card usage in targeted markets of the company:


Credit Card Usage (Source: Company Reports)

What to Expect: The company is anticipating that strong and growing pipeline would help in delivering significant growth. The company stated that more than 500 merchants are currently engaged in various parts of the sales cycle, which includes large global enterprise merchants. The company has identified numerous target countries to focus its sales and marketing efforts, with a focus towards the United States, Canada, UK, Italy, Singapore as well as Australia.

Stock Recommendation: The company stated that the US and Europe pipeline remains strong and the company has been witnessing significant interest from Australia since its listing. SPT reported a gross margin of 49.3% in FY18, reflecting a growth of 26.7% on YoY basis. It posted a current ratio of 0.20x in FY18 with an increase of 93.0% on YoY basis. This implies that the company has improved its position to address its short-term obligations. Coming to the stock’s past performance, it generated negative returns of 19.71% and 47.62% in the time span of one month and three months, respectively. Hence, considering the above stated-facts coupled with decent outlook and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.635 per share (up 15.455% on 23^rd July 2019, due to the release of a new partnership agreement with GHL ePayments Sdn Bhd).
 

EML Payments Limited

Adoption of New Software: EML Payments Limited (ASX: EML) is an issuer of pre-paid financial cards. The market capitalistion of the company stood at ~A$815.6 Mn as on 23^rd July 2019. Recently, the company, via a release dated 22^nd July 2019 announced that it bought software from PayWith Worldwide, Inc. that supports the company’s salary packaging vertical. The company added that the software is already integrated with its technology to provide cardholders with a merchant coalition that includes discounted offers from thousands of merchants.

The company would be paying a cash consideration of US$1 million and transfer its investment in PayWith Worldwide Inc. as part of the purchase consideration.The company reported total revenue of $47.2 Mn in 1H FY19.

 
Total Revenue (Source: Company Reports)

Future Prospects: The company anticipates providing services to over 260,000 benefit account holders by April 2022 from an estimated addressable market of more than 350,000 benefit account holders. EML Payments Limited would immediately benefit from incremental cash savings of around A$0.6 Mn in FY20 rising to up to more than A$1.0 Mn p.a after the completion of the Smartgroup transition. The company reaffirmed full year FY19 guidance for EBTDA in the range of $27-28 Mn inclusive of FEC acquisition costs.

Stock Recommendation: The net margin of the company stood at 5.4% in 1H FY19 against the industry median of 23.2%. It reported a current ratio of 1.15x in 1H FY19 against the industry median of 2.81x. With respect to the stock’s past performance, it generated returns of 8.33% and 64.14% in the time span of one month and three months, respectively. Hence, considering the above-stated facts and decent outlook, we give a “Hold” recommendation on the stock at the current market price of A$3.290 per share (up 1.231% on 23^rd July 2019).
 

FlexiGroup Limited

Higher Value Sales: FlexiGroup Limited (ASX: FXL) is a small-cap company with the market capitalization of ~A$721.74 Mn as on 23^rd July 2019. The company via a release dated 22^nd July 2019 announced that it has added several high profile retailers to its humm platform (Buy Now Pay Later platform).  The company added that the retailers represent healthy momentum throughout humm’s target verticals of homewares, electrical, health as well as home improvement. The higher value sales were driven by BNPL platform Humm with an average transaction value of $3,760 with its ‘big things’ wallet and more than $400 for ‘little things’ online.

The company further added that the retailers are in favour of humm’s differentiated offering, broader demographic and spending power, with 2,000 seller locations added since May, taking the total to 15,000 partners.The following picture gives an idea of the financial performance of the group:


Key Numbers (Source: Company Reports)

Future Aspects:In the Annual Report 2018, the company added that as it capitalises on the technology, funding and distribution strengths, it would continue to consolidate the platforms, refine funding structures and integrate the group functions, in order to deliver the material earnings upside. Additionally, it stated that the company would be focusing towards making customer interface as well as offerings best in the market in response to the monoline fintechs that have evolved over the last few years.

Stock Recommendation:The company reported a net margin of 12.3% in 1H FY19, reflecting YoY growth of 32.0%. This implies that the company is effectively converting its topline into the bottom line. On the stock’s performance front, it produced returns of 12.62% and 25.77% in the time span of one month and three months, respectively. Currently, the stock is trading slightly above the average of 52 week high and low prices of around $1.657. Hence, in the view of aforesaid parameters and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$1.785 per share (down 2.459% on 23rd July 2019).


Comparative Price Chart (Source: Thomson Reuters)   

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