Class Ltd
Decent March quarter update: Class Ltd.’s (ASX: CL1) stock rose 2.27% on April 04, 2018 after the company gave the March quarter update on April 03, 2018. In the March quarter, CL1’s total accounts grew by 6,102 to 164,255, including 158,938 SMSFs on Class Super and 5,317 Class Portfolio accounts. The total Class customers rose to 1,316 with a quarterly addition of 25 new customers. This was reported despite the fact that AMP is migrating their funds to their own software, however no notice or timeframe for the completion of this migration has been provided. As at 31 March 2018, they had approximately 8,800 SMSFs on Class. Moreover, SMSFs on Class Super grew on the back of the clients who signed up under the Q2 ‘Better move’ campaign and continue to load their SMSFs onto Class Super. As a result, the business still seems to be well positioned for a post-super reform market. Additionally, in the March quarter, there is 30% growth in the Class Portfolio to 5,317 accounts and 30% of Class Super clients are now using Class Portfolio. In the March quarter, Class Portfolio ‘Profit. Ability’ campaign has received a strong response, and 1,217 portfolios were added through a mix of cross-sell and new business. The campaign has also generated a healthy prospect pipeline, which is expected to boost sales activity through Q4 and into FY19. On the other hand, CL1 stock has fallen 21.15% in one month as on April 03, 2018. We still believe that there is potential in the stock in the long-run, and give a “Hold” recommendation on the stock at the current price of $2.25
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Total Account Growth (Source: Company Reports)
Afterpay Touch Group Ltd
Loss incurred due to payment difficulties is low compared to the industry standards: Afterpay Touch Group Ltd.’s (ASX: APT) stock dropped 5.33% on April 04, 2018 while the company has responded in view of many erupting concerns and speculation in the market. The group has clarified that it applies a proprietary fraud and repayment capability check for every order approved and rejects about 30% of attempted transactions as per the check. Further, for 1H 2018, the group’s loss due to payment difficulties has been at 0.7% (gross less than 2%), which is below the industry standards. Moreover, APT is upgrading its procedures to curb any alleged under age usage of its service by dishonest users. APT’s merchant agreement requires them to follow State and Federal laws at all times and retains the option for Afterpay to suspend merchant services if the payment or processing the company purchase is in breach of any relevant law. Moreover, APT has planned to introduce a number of product enhancements. APT is not a regulated credit product under the National Credit Code but aims to proactively engage with the regulators and the stakeholders. ASIC has announced a review the company’s all buy now, pay later services, for which the company will continue to actively engage with the regulator. Additionally, founding shareholders of APT, Anthony Eisen and Nick Molnar, who are subject to a two-year ASX escrow restriction due to expire in May 2018, might sell up to 10% of their underlying individual shareholdings (less than 2.5% of total issued capital) over the next twelve months at the back of asset diversification reasons. However, this will be subject to share price and general market conditions. Meanwhile, APT stock has fallen 18.48% in one month as on April 03, 2018. As of now, we give a “Hold” recommendation on the stock at the current price of $5.65
Zip Co Ltd.
New partnership with Tigerair Australia: Zip Co Ltd.’s (ASX: Z1P) stock rose 10.3% on April 04, 2018, and was added to All Ordinaries, effective from March 19, 2018, as per March 2018 Quarterly Rebalance of the S&P/ASX Indices. The group’s products are progressed ones in the credit card replacement sector and cater to a varied type of customers. Z1P has also signed a new partnership with Tigerair Australia to add its Zip interest-free payment method to the low-cost carrier’s suite of payment options. The platform is expected to go live, on or around 16 April 2018. Additionally, for FY 18, the company expects to achieve cashflow breakeven on a monthly basis; and will continue to grow the merchant and customer base and maintain the focus on increasing customer engagement. Z1P during FY 18 will release the first version of the Zip native App, brand alignment under ‘Zip’ and will further diversify its funding program. The company is in advanced negotiations with senior and mezzanine financiers. Meanwhile, Z1P stock has fallen 18.32% in one month as on April 03, 2018 at the back of prevailing volatility. Based on the unfolding potential, we give a “Speculative Buy” recommendation on the stock at the current price of $0.86
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