Openpay Group Ltd

OPY Details

An Update on Q3FY21: Openpay Group Ltd (ASX: OPY) is a technology company that provides payments platform for merchants and consumers. The company’s software and technology platform enables customers to select from a range of no interest payment plans when purchasing goods or services. These plans allow customers to pay for products over time via several repayments. The company has registered a robust Q3FY21 as announced on 28 April 2021. The company has reported an increase of 185% YoY in its active plans to 1.7mn in Q3FY21 due to recovery in bricks and mortar growth rates in OPY’s healthcare and automotive segment. Active consumers have gone up by 102% YoY to 505k in the same period supported by repeat customers. The company has reported an increase of 70% YoY in Active Merchants to 3.4k as of Q3FY21. The company has posted an increase in its total transaction value (TTV) and revenue by 80% YoY and 24% YoY respectively to $83mn and $6.6mn respectively during Q3FY21. 

Growth in Key Indicators (Source: Company Reports)

Building Strong Pipeline for OpyPro B2B SaaS: OPY has built a strong pipeline of enterprise merchants for its OpyPro B2B SaaS platform. The company has entered into a binding agreement with Lumi Financial Management Pty Ltd (Lumi) to meet the market demand. As per the agreement, OPY will refer trade account customers to Lumi. Lumi may get into separate agreement with potential trade customers for the provision of trade credit, going forward.

1HFY21 Financial Highlights: OPY has reported an increase in its total income to $13.62mn in 1HFY21 as compared with $8.27mn in 1HFY20. The company has posted a loss of $25.48mn in 1HFY21. OPY has seen a decline in its cash and cash equivalent position to $39.28mn as on 31 December 2020, compared with $70.05mn as on 30 June 2020.

Key Risks: The company utilises technology for its business functioning. Any change in technology or fail to pursue an updated technology may lead to business loss for the company. The company operates in multiple countries. Hence, any severe movement in foreign exchange prices may lead to financial losses for the company.

Outlook: The company expects to continue accelerating growth with its exclusive offering to merchants and consumers. The company is likely to grow on scale in its home market, Australia. The company is likely to address the gaps in the US market to capture the sizeable market and continues to follow its six- pillar strategy to drive growth in the BNPL segment. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: In the last one month, OPY has decreased by ~13.90% and by ~28.44% in the last three months. The current market capitalisation of OPY stands at ~$263.93mn as of 28 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.645-~$4.980. On the technical analysis front, the stock has a support level of ~$2.037 and a resistance of ~$2.299. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount as compared to its peer average, considering the company is posting losses and the related associated risks. For this purpose, we have taken peers Moneyme Ltd (ASX: MME), Earlypay Ltd (ASX: EPY), Zip Co Ltd (ASX: Z1P). Considering Growth in UK Active Plans and Active Customers, strong pipeline of merchants for its B2B SaaS platform, increase in active customers and merchants, valuation, and the key risks associated with the business we recommend a “Speculative Buy” rating on the stock at the current market price of $2.08, down by 2.348% as on 28 April 2021.

OPY Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Laybuy Group Holdings Limited

LBY Details

Q4FY21 Performance Highlights: Laybuy Group Holdings Limited (ASX: LBY) is a provider of an integrated payment platform that caters to various consumers and merchants. The company has registered an increase of 129% YoY in its annualized gross merchandise value (GMV) to NZ$645mn. The company has posted an increase of 105% YoY in its revenue to NZ$9.8mn in Q4FY21. Net Transaction Margin (NTM) reported at 2.5% of GMV in Q4FY21 as compared with negative 0.3% in Q4FY20 on the back of reduction in customer defaults. Active customers increased by 87% YoY to 756,000 in Q4FY21 and active merchants increased by 75% YoY to ~9000.

Active Customers Growth (Source: Company Reports)

1HFY21 Financial Highlights: The company has registered an increase in total income to NZ$13.3mn in 1HFY21 as compared with NZ$5.3mn in 1HFY20. The company has posted a loss of NZ$26.4mn in 1HFY21 due to significant rise in operating costs. LBY has seen an increase in its cash and cash equivalent position to NZ$31.8mn as on 30 September 2020 as compared with NZ$9.9mn as on 31 March 2020.

Key Risks: The company requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company. The company is operating its business in multiple countries. Any severe movement in foreign exchange prices may lead to financial losses for the company.

Outlook: LBY is expecting its revenues to grow in a range of 90%-100% YOY in FY22 and expecting its NTM to improve in the same period on 12 month rolling average basis. LBY remains on track to surpass annualized GMV of NZ$1bn during FY22. 

Valuation Methodology: Price/Book Value based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: In the last one month, LBY has decreased by ~17.52% and by ~45.39% in the last three months. The current market capitalisation of LBY stands at ~$141.31mn as of 28 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.790-~$2.300. On the technical analysis front, the stock has a resistance of ~$0.881. We have valued the stock using a Price/Book Value multiple-based illustrative relative valuation method and arrived at a target price of high double-digit upside (in % terms). We believe that the company can trade at some premium as compared to its peer average, considering an increase in total revenues and cash position. For this purpose, we have taken peers Bravura Solutions Ltd (ASX: BVS), EML Payments Ltd (ASX: EML), Iress Ltd (ASX: IRE). Considering the strong cash position positive outlook, valuation, current trading levels and the key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.79, down by ~2.47% as on 28 April 2021.

LBY Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Note: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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