Afterpay Touch Group Limited (ASX: APT)

APT Details

Strong underlying growth: Afterpay released its business update report wherein sale for the first three-quarters of FY18 was recorded at $1.45 billion (against $290 million for first three quarters of FY17, representing a rise of 400%). Currently, there are approximately 14,000 merchants on-board (up from approximately 11,500 at the end of Q2FY18). Merchant number growth in Q3FY18 was over 45 per cent higher as compared to Q3FY17 and the number of new customers in Q3FY18 was 30 per cent higher as compared to Q3FY17. The Group developed and extended few key strategic partnerships during Q3FY18. After a success of pilot program, Afterpay will extend its partnership with Jetstar to expand its business so that it is available to Jetstar customers. Afterpay has been working with large international banks for some time so that it can establish a warehouse receivables funding facility for about $200 million and the warehouse funding facility of $350 million in Australia, which Afterpay has already undertaken from NAB and has drawn only to $125 million at the end of March 18. This will enable the Group to expand its integrity facility. The Group was awarded with “Payments Innovator of the Year” award. The Group has grown rapidly and the losses which were associated due to fraud have become lesser now. Moreover, an external review of its customer base and transactions confirmed that the Group’s customer-centric approach was promoting responsible customer spending outcomes.The share price was up by 38.46 per cent in the past six months and there was a dip of 5.7 per cent in the price as on 11 April 2018. This may be owing to the fact that the third quarter lacked seasonal trading uplift as otherwise seen in previous quarter and had fewer days as well. We give a “Hold” recommendation at the current market price of $ 5.600, with all eyes on US business expansion while Australia’s scenario seems to be saturating a bit.
 

Retail Customers (Source: Company Reports)
 

Xero Limited (ASX: XRO)

XRO Details

Momentum in expansion efforts: The Group is continuing to burgeon high with expansion efforts across Australia, New Zealand, UK and US. Addition of subscribers has been driving momentum (subscribers reaching 1,199,000 as at September 2017). XRO recently issued 129,588 ordinary shares and 60,838 RSUs (Restricted stock units). As per March quarterly rebalance of S&P/ ASX Indices, XRO was added to S&P/ASX200, S&P/ASX100 and to All Australian 200 Index, effective from March 19, 2018. The Board appointed Steve Vamos as the Group’s CEO, who succeeded Rod Drury. Xero completed the consolidation of its listing on the ASX and now one will be able to trade XRO shares exclusively on the ASX platform. Its Chief Operating and Financial Officer Sankar Narayan sold 3,000 Xero shares to repay his personal liabilities, and this raised some bit of a concern in the market initailly. Meanwhile, the Group has delivered significant new products like Xero HQ App Suite, Xero HQ Ask and Xero Discuss. Financially, it performed well and recorded an increase of 37 per cent as operating revenue ($188 million) for 1H FY18 as compared to the same period in the prior year. The share price was up by 16.9 per cent in the past six months, and we continue to give a “Hold” recommendation at the current market price $ 34.910.
 

Gross Margin Trend (Source: Company Reports)
 

Nearmap Limited (ASX: NEA)

NEA Details

Growing customer base: Nearmap has a proven track record of bringing innovative products to the market and lately came up with its 3D content. The Company undertook investments to expand its capture program to meet its customer and market needs. It has a competitive and a scalable business model with a growing customer base of loyal, recurring subscribers and with high margins provided from its content available to its customers. The Company’s annualised contract value grew by 31 per cent for the first half of 2018 and amounted to $54.2 million as compared to the same period in the prior year. Now Nearmap is in a strong position to leverage from its investment for the next stage of growth. The Group reduced the number of options by 50,000 due to the lapse of unexercised employees share options. Nearmap has also appointed Ms Sue Klose as its interim Chief Marketing Officer of the Company for the six-month period which commenced from 5 March 2018. The share price was up by 49.2 per cent in the past six months and was up by 1.65 per cent as on 11 April 2018. We give a “Hold” recommendation at the current market price of $ 0.925.
 

ACV Portfolio Growth (Source: Company Reports)

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