Stocks’ Details

Sezzle Inc.

H1FY19 Total income grew to $4.3 Mn from $0.3 Mn on pcp: Sezzle Inc. (ASX: SZL) operates in the payments sector of the retail industry with its flagship payment platform, named as Sezzle which facilitates fast, secure payments between shoppers and retailers, via a short-term, interest-free instalment payment plan that delivers to shoppers both a budgeting and financing value proposition.

H1FY19 Key Highlights: Underlying Merchant Sales (UMS) for the period was reported at $70.2 million. Active Customers grew to 429,898 as on June 30, 2019 as compared to 815 for the prior comparative period. Total income for the period was reported at $4.3 million, as compared to $0.3 million for the prior comparative period. The total income comprised, Sezzle income at $3.6 million and End-customer other income at $0.7 million during the period. Net transaction losses for the period were reported at 1.5%, down from 2.1% in the previous corresponding period. Net transaction margin (NTM) for the period was reported at 0.3%, as compared to 1.2% for the comparative period ended on June 30, 2018. The change in NTM was driven by mix in method of payment by End-customers. Sezzle began accepting credit and debit cards as a form of payment during the second half of 2018 which carry high associated processing costs.


H1FY19 Key Metrics (Source: Company Reports)

What to expect: As per the release, the company is likely to continue its growth trajectory through merchant and user acquisitions. It is emphasizing over reducing its loss rates and improving its operational efficiencies.

The company is expected to deploy the proceeds from the IPO into the sales and marketing efforts in the USA and elsewhere, in the second half of the year.Its Canadian launch has given its team the experience and confidence to explore new geographies for its payment products. It has deployed its platform to support multiple languages and connections to various payments systems, enabling further growth internationally.

Stock Recommendation: SZL’s share generated a return of 13.18% in the last one-month.During the period, the company has received favourable response from the market which can be seen from the ratings received such as, 95% of reviewers rate it as “Excellent” on Trustpilot; holds a 4.8-star review from its users on Facebook, and received 4.7-star and 4.8-star rating on Android and iOS, respectively. Its gross margin for FY18 stood at 43.9%, as compared to negative of 20.7% in FY17. Its current ratio for FY18 stood at 4.29x. Currently, the stock is priced slightly towards its 52-week high level of $2.86. Hence, considering the aforesaid facts and current trading levels, we have a watch stance on the stock at the current market price of $2.490, down 1.19% on August 30, 2019 and suggest that investors should wait for better entry levels.

City Chic Collective Limited

FY19 Sales increased by 12.6% to $148.4 Mn on previous year: City Chic Collective Limited (ASX: CCX) operates within the women's fashion retail sector in Australia, New Zealand, USA, Germany and the UK. The Southern Hemisphere, which comprises Australia and New Zealand, represented 80% of revenue with the balance in the Northern Hemisphere markets of USA, UK and Germany.

FY19 Key Highlights: Sales for the period increased by 12.6% to $148.4 Mn, with comparable sales growth of 12.2%. Online penetration was reported at 44% of total sales, as compared to 36% in the previous period and 40% in the first half of FY19. Reported profit before tax from continuing operations for the period was reported at $19.2 Mn, as compared to $11.5 Mn in FY18. Underlying EBITDA for the period increased by 25% to $24.9 Mn on previous period, and underlying EBITDA margin for the period was reported at 16.8% as compared to 15.1% in FY18. Normalised operating cash flow for the period, was reported at $21.5 Mn. Net cash at the end of period, was reported at $23.2 Mn, as compared to $16.1 Mn. The Board of Directors declared a fully franked final ordinary dividend of 1.5 cents per share, with record date and payment date on September 16, 2019 and September 30, 2019, respectively.



FY19 Key Metrics (Source: Company Reports)

What to Expect: As per the release, In FY20, the company expects to focus on its ongoing store roll-out across Australia and New Zealand with further 20 stores over approximately 2 years. Moreover, the company expects to convert its existing high performing stores to larger format (further 15 conversions over 2-3 years). Other future developments include, continuous expansion of lifestyles and categories; expansion into new segments within plus-size; growing the customer base in the USA; adding new partners in the Northern Hemisphere; and investments to enhance customer touchpoints.

Stock Recommendation: CCX’ share generated a substantial return of 104.58% on YTD. The stock is currently trading at its 52-week high level of $2.150. Its gross margin, EBITDA margin and net margin for H1FY19 stood at 60.6%, 18.2% and 13.0%, better than the industry median of 22.3%, 6.9% and 4.2%, respectively. Hence, considering the aforesaid facts and current trading levels, we have a watch stance on the stock at the current market price of $2.150, up 7.5% on August 30, 2019 on account of positive sentiment over company outlook and suggest investors to wait for better entry level.
 

Splitit Payments Limited

Strong 1H19 Results: Splitit Payments Limited (ASX: SPT) provides cross-border credit card-based instalment solutions to businesses and retailers. The company on August 30, 2019, released its half yearly results for the six months to 30 June 2019 wherein it highlighted that its revenue from continuing operations increased by 193% on pcp to US$798K, as compared to US$272K in H1FY18.This increase was due to strong growth in merchant fees as a result of new merchants accepting Splitit and strong growth in unique shopper numbers and transaction volumes. Research and Development spend increased from US$482K in H1FY18 to US$1.0 Mn in H1FY19, as the Company improved the end-to-end customer experience by developing additional functionalities and applications, as well as improving our platform and system integration. Sales and marketing costs also increased as planned from US$451K in H1FY18 to US$1.8 Mn H1FY19 as Splitit broadened awareness of its solution and accelerated its engagement with larger scale merchants and potential strategic partners to expand its global reach. Gross profit for the period increased by 468% on pcp to US$721K. The Company reported a net loss of US$3.8 Mn for H1FY19, compared to a US$1.2 Mn net loss for H1FY18.

Company’s cash position for the period was reported at the end of the period was reported at US$23.7 Mn following the IPO in January 2019 and subsequent capital raising.


H1FY19 Key Metrics (Source: Company Reports)

What to expect: The company laid strong foundations in the first half of FY19 for future growth. It has a growing sales pipeline of more than 700 potential merchants and is in the discussion with several new potential strategic partners across its target geographies. It expects to continue to deliver strong growth in unique customers and transaction volumes, which will support growth in merchant fees in H2FY19 and beyond. The company will also continue to invest in platform innovation to add product features and improve the end customer experience, as well as invest in marketing to broaden awareness of its payment solution and drive broader merchant adoption.

Stock Recommendation: SPT’s share generated negative six months return of 64.29%. The stock is currently, trading close to its 52-week low level of $0.305. Its gross margin for FY18 stood at 49.3%, better than 22.6% in FY17. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.550, up 37.5% on August 30, 2019, owing to the release of 1HFY19 results.


Comparative Price Chart (Source: Thomson Reuters) 

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