Sezzle Inc.

SZL Details
 
Strong Momentum in Online Shopping: Sezzle Inc. (ASX: SZL) provides a technology-driven payment platform that facilitates fast, secure, and easy payments between end-customers and retailers. As on 27 April 2020, the market capitalization of the company stood at $259.76 million. The company has recently released its activity report for the quarter ended 31 March 2020 wherein it reported strong momentum in online shopping as customers look for flexible payment options.

Strong Financial and Operational Position: During 1QFY20, underlying merchant sales witnessed an increase of 13.6% on the previous quarter and stood at $119.4 million. The growth in merchant fees outpaced underlying merchant sales, with an increase in fees by 17.5% to $6.8 million. In the same time span, active customers reached ~1.15 million, and active merchants grew to 12,715. During the quarter, the company reported a strong financial position, which is reflected in its liquidity, improving net transaction margin and stable credit performance.


Key Operating Metrics (Source: Company Reports)

Future Expectations and Growth Opportunities: Despite global economic headwinds stemming from COVID-19, SZL results reflect a trajectory of solid growth across all key operating metrics. The company has seen very little effects from the pandemic and has witnessed a shift away from traditional in-store shopping to eCommerce, where customers are looking for more flexible payment options.

Stock Recommendation: As per ASX, the stock of SZL gave a substantial return of 262.5% in the last one month. During FY19, gross margin of the company witnessed an improvement over the previous year and stood at 52.3%, up from 43.9% in FY18. On TTM basis, the stock is trading at an EV/Sales multiple of 5.2x, lower than the industry average (Professional and Commercial Services) of 29.1x. Considering the returns, substantial shift of customers for flexible payment options and decent financial performance despite the pandemic, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.525, up by 5.172% on 27 April 2020, owing to the recent update regarding quarterly results. 

 
SZL Daily Technical Chart (Source: Thomson Reuters)

Pendal Group Limited

PDL Details
 
Strong Balance Sheet: Pendal Group Limited (ASX: PDL) is a global asset management company which provides investment management services. As on 27 April 2020, the market capitalization of the company stood at $1.57 billion. The company has recently released its quarterly report for the period ended 31 March 2020, wherein it reported a decline of 15.2% in Funds Under Management (FUM) to $86 billion. This decline, however, is considerably better than market falls of key global equity indices. The business is strong and resilient, supported by the range and type of funds. The company has maintained cost discipline, along with a strong, debt-free balance sheet.   


Quarterly FUM (Source: Company Reports)

What to Expect: Despite the period of uncertainty, Pendal Group looks relatively stable and is alert to opportunities for the longer term. It is focusing on long-term growth opportunities and is seeking to deliver sustainable, long-term growth for its shareholders. The company is expecting further opportunities in the US, which has strong prospects for growth. Moreover, Europe comprise the biggest portion of its business with continuous growth potential. Markets are driven by sentiments and may be affected by the short term uncertainty but are consistent in enduring growth in the medium term to long term. The company is diversified across geographies which might help it to insulate against market shocks. It has placed its focus on managing its client portfolios.

Valuation Methodology: Valuation Methodology: P/E Multiple Based Relative Valuation Mehtod (Illustrative) 

P/E Multiple Based Relative Valuation Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of PDL gave a return of 36.52% in the past one month and is inclined towards its 52-weeks’ low level of $3. During FY19, gross margin of the company stood at 99.6%, higher than the industry median of 95.2%. In the same time span, net margin of the company was 30% as compared to the industry median of 23.6%. Considering the trading levels, returns in the last one month, positive outlook over the medium term and improved margins, we have valued the stock using P/E multiple based illustrative relative valuation method and have arrived at an upside of lower double-digit (in percentage terms). For the said purpose, we have considered Platinum Asset Management Ltd (ASX: PTM), Steadfast Group Ltd (ASX: SDF), NIB Holdings Ltd (ASX: NHF) etc., as peers. Hence, we recommend a ‘Hold’ rating on the stock at the current market price of $4.94, up by 1.646% on 27 April 2020. 

 
PDL Daily Technical Chart (Source: 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.