Stocks’ Details

Sezzle Inc.

4QFY20 Highlights: Sezzle Inc. (ASX: SZL) is a technology driven payments company that provides a payment platform that facilitates payments between consumers and retailers. Sezzle Inc. has posted decent growth in 4QFY20. SZL posted a record quarter by posting UMS growth of 205.4% YoY to US$320.8mn. Merchant fees as a % of UMS in 4Q reached at 5.4% as compared with 5.5% in the same quarter previous year. Active consumers went past 2mn mark and reached 2.2mn with an increase of 143.9% YoY. Active merchants have seen an uptick of 166.6% YoY in Q4FY20 to 26,690.

 Q4FY20 Business Growth (Source: Company Reports) 

Outlook: Sezzle Inc has surpassed its goal of reaching US$1.0bn annualized run rate goal. As per company report dated 26 December 2020, the company is focusing on three main drivers for their growth – Users, Merchants and Payment Volume.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the last 3 months, SZL has increased by 25.78% on ASX. As On the technical analysis front, the stock has a support level of ~$6.50 and resistance of ~$8.85. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose we have taken peers Afterpay Ltd (ASX: APT), EML Payments Ltd (ASX:EML), Zip Co Ltd (ASX:Z1P) and more. Considering decent performance in Q4FY20, focus on growth drivers, modest outlook and valuation, we give a “Hold” rating to the stock at the current market price of $8.50, up by 5.590% as on 2 Feb 2021. 

EML Payments Limited

Increasing Revenues with a Dip in Profits: EML Payments Ltd (ASX: EML) provides payment solutions. The Company operates through three segments: Gift & Incentive (G&I), General Purpose Reloadable (GPR) and Virtual Account Numbers (VANS). The Company operates across Australia, North America, United Kingdom and throughout Europe. Mitsubishi UFJ Financial Group, Inc. has become a substantial shareholder in EML by increasing its voting power to 7.64% from 6.07%. The company has posted a consistent growth in its revenues ($120.96mn in FY20 vs $97.20mn in FY19) though posted a loss in FY20 (-$5.85mn in FY20 vs $8.45mn in FY19).

EML Revenues and Profits (Source: ASX)

Outlook: EML focus is to continue delivering safe and secure payment solutions for their customers. The company project to pursue a multi-faceted growth strategy by accelerating existing product suites, funding necessary research and development for product ranges, negotiating strategic alliances with key clients and industry participants, pursuing acquisitions of complementary businesses to increase global footprint.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the last 3 months, EML has increased by 32.8% on ASX. The stock is currently trading below the average 52-week price level range. On the technical analysis front, the stock has a support level of ~$3.80 and resistance of ~$4.20. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of high single-digit upside (in % terms). For the purpose we have taken peers Pushpay Holdings Ltd (ASX: PPH), Afterpay Ltd (ASX: APT), Tyro Payments Ltd (ASX: TYR), and more. Considering higher revenues, positive net cash flows, current trading level, and valuation, we give “Hold” rating to the stock at the current market price of $3.980, up by 2.577% as on 2 Feb 2021.

Tyro Payments Limited

Trading Update: Tyro Payments Limited (ASX: TYR) provides payment solutions and business banking products. As on 2^nd Feb 2021, the company’s market capitalisation stood at ~$1.25 billion. In a trading update provided on 1 February 2021, the company informed that its transactional value has increased by 10% in Jan 2021' year to date (Jul 2020- Jan 2021) to $13.998 bn vs $12.753 bn during the same period previous year. On 7 January 2021, the company updated about terminal connectivity issue which impacted some of TYR’s EFTPOS terminals.

Robust Growth in Transactional Values and Merchant Base: The transactional value increased by 15% in FY20 to $20.1bn from $17.5bn in FY19 aided by transactions through e-commerce valued at $10.6mn from a zero base whereas the merchants base increased by 11% to 32,176 in FY20 from 29,031 in FY19. TYR managed to lower its EBITDA losses in FY20 to $4.4mn from $8.6mn in FY19, though the net losses have seen an increase due to IPO expense and higher depreciation costs. Net Cash Inflows increased significantly from $23.90mn in FY19 to $103.76mn in FY20 on back of proceeds from IPO. 

Transactional Value and Payment Revenue (Source: Company Reports)

Outlook: The company is focusing on assisting their merchants in recovering their businesses going forward. The company is building an ecosystem centered around payments, by introducing value-adding features and products designed to attract new merchants and retain existing merchants.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the last 3 months, the stock of TYR has corrected by 30.72% on ASX. The stock is currently trading below the average 52-week price level range. On the technical analysis front, the stock has a support level of ~$2.41 and resistance of ~$3.01. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose we have taken peers EML Payments Ltd (ASX:EML), Sezzle Inc (ASX: SZL), Zip Co Ltd (ASX: Z1P). Considering rising transaction volume, expansion in merchant base, decent FY20 performance, current trading level, and valuation, we give “Speculative Buy” rating to the stock at the current market price of $2.62, up by 5.645% as on 02 Feb 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.