Afterpay Limited

APT Details

Closing of Share Purchase Plan: Afterpay Limited (ASX: APT) provides technology-driven payments solutions for consumers and businesses via its Afterpay and Pay Now services and businesses. The market capitalisation of the company stood at $10.44 Bn as on 10^th February 2020. On 27^th February 2020, the company would be releasing its results for the first half of the financial year 2020. In another update, the company announced that Elana Rubin has made a change to the holdings in the company on 29^th January 2020 by acquiring 85 fully paid ordinary shares for a consideration of $23.00 per share. Also, the company has recently closed its Share Purchase Plan, which was announced on 11^th June 2019 for raising an amount of $30 million. The share purchase plan of the company has given opportunities to eligible shareholders in Australia and New Zealand to subscribe for the new fully paid ordinary shares in the company with the value of up to $15,000, without incurring brokerage or other transaction costs.

For the 4-months ended 31^st October 2019, the company experienced continued growth throughout all geographies and channels with underlying global sales amounting to $2.7 billion, a rise of 110% over pcp. Moreover, the company reported 6.1 million active customers globally, at the end of October 2019, with a rise of 137% as compared to pcp.


Business Update (Source: Company Reports)

Opportunities in International Markets: The company expects growing opportunities in the United States and United Kingdom markets. The company has significant potential to accelerate its online offering and expand into new channels and verticals. It continues to assess further opportunities for international expansion.

Stock Recommendation: During the period of four months ended 31^st October 2019, the company has signed a subscription agreement for private placement amounting to $200 million with Coatue, which is a leading US-based technology investor. The company would be utilising these proceeds for global platform expansion opportunities beyond mid-term plan deliverables. On the valuation front, the stock of APT has an EV to Sales multiple of 26.7x as compared to the industry median (Professional & Commercial Services) of 2.8x on TTM basis. APT is trading at a price to book multiple of 16.2x against the industry median (Professional & Commercial Services) of 2.4x on TTM basis. As per ASX, the stock of APT is trading close to its 52-week high level of $40.730. Hence, considering the stretched valuation and current trading levels, we give an “Expensive” rating on the stock at the current market price of $38.520 per share, down by 2.333% on 10^th February 2020.
 
 
APT Daily Technical Chart (Source: Thomson Reuters) 
 

Splitit Payments Limited

SPT Details

New Merchant Agreement: Splitit Payments Limited (ASX: SPT) is engaged in providing a credit card-based installment solution to businesses and merchants. The market capitalisation of the company stood at $160.44 Mn as on 10^th February 2020. The company recently announced that it has entered into a new merchant agreement with Resident Home, LLC, which is an online retailer of furniture, including high-quality, memory foam mattresses in the US. As per the terms of the agreement, Resident Home, LLC would be adding Splitit instalment payments on the US website of its flagship brand, Nectar. The signing of the agreement is a proof of SPT’s continued success in drawing influential brands in North America as well as further progress in building high-value merchants in core categories.

The company reported Q4 2019 results with record sales and strong growth across key performance metrics. It reported merchant sales volume amounting to US$27.1 million, reflecting a rise of 20% as compared to the prior quarter. During the period, the company inked a new partnership agreement with Stripe, a global payment technology company, to integrate SPT’s solution with Stripe Connect, streamlining merchant onboarding as well as enhancing the merchant experience.


Quarterly Performance Metrics (Source: Company Reports)

Focus for Q1 FY20: During Q1 FY20, the company would focus on streamlining its merchant onboarding process for enhancing experiences for its customers and expanding third party credit facilities for merchants. SPT would also continue to invest in its technology to support growth.

Stock Recommendation: Debt to equity multiple of the company stood at 0.01x in 1H FY19 against the industry median of 0.34x. Current ratio of the company stood at 17.22x in 1H FY19 as compared to the industry median of 2.20x. This reflects that the company is in a decent position to address its short-term obligations as compared to the broader industry. The stock of SPT is trading at a price to book multiple of 3.1x as compared to the industry average (Technology) of 3.6x on TTM basis. Hence, considering the company’s decent liquidity position and deleveraged balance sheet, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.520 per share, up 0.971% on 10^th February 2020.

 
SPT Daily Technical Chart (Source: Thomson Reuters)

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