AfterPay Touch Group Limited

APT Details

Splendid Topline Growth: Afterpay Touch Group Limited (ASX: APT) is Australia-based technology driven payment company and comprises the Afterpay and Touch products and businesses. The Company is focused on applying its technology to provide a retail payments outfit that facilitates commerce between retail merchants and end customers, offering a buy now, receive now, pay later service. It has three main business verticals i.e., mobility and payments, health and government and retail services. APT’s consolidated revenue was at $49.9 Mn (up 732% YoY) and EBITDA (excluding significant items) at $12.1 Mn (up 1917% YoY) for 1HFY18. Loss after tax came at $743,000 in 1HFY18 due to high finance cost, one-time cost related to merger activity & international expansion expenses, and higher taxation.
 

Financial Performance (Source: Company Reports)
 
In the past six months, AfterPay purchasing customers have grown by 85% to ~1.5 million and retail partners (registered to about 12000 in Australia and New Zealand) have sold more than $900 Mn of goods and services, up by 120% as compared to 1HFY17. With the completion of the merger of Afterpay and Touchcorp, the opportunity to grow further organically and inorganically is high. While the group has not declared any dividend for first half of the year, the continuous strong performance may put forth a dividend paying scenario in the future. Meanwhile, APT stock has risen 91.67% in six months as on March 05, 2018. Based on the aforesaid facts, we give a “Hold” recommendation on the stock at the current price of $7.54
 

APT Daily Chart (Source: Thomson Reuters)
 

iSignthis Limited

ISX Details

Poised for growth, execution is the key: iSignthis Limited (ASX: ISX) is the global leader (leading RegTech) in remote identity verification, payment authentication and payment processing to meet anti-money laundering (AML)/counter terrorist funding (CFT) requirements. The company provides end-to-end on-boarding service for merchants with unified payment and identity services through Paydentity and ISXPay solutions. Consolidated revenue during 1HFY18 was recorded at $826,912 against $308,189 in 1HFY17, marking a splendid growth of 168.3% YoY. Sales surged due to increased platform usage from existing customers and new merchant’s activation during the December quarter. Loss after income tax came at $2,606,234 in 1HFY18 from 3,355,811 in 1HFY17, representing reduction of 22.3% YoY supported by higher sales growth during the period. The company’s guidance for topline growth in Q3FY18 is said to be at least 50% higher than the December quarter. Moreover, the company updated the annualised gross turnover processing volume (GTPV) book value to be more than $400 Mn from previous reported $100 Mn. Settlement revenue now geared up to over 65% of the total revenue and could become major revenue driver for the company going forward. Currently, the company is in expanding phase of eMoney services to increase the market size.
 

Consolidated Financial Performance (Source: Company Reports)
 
With four EU based settlement merchants being added recently, the group is expected to have a positive impact on revenue over the term of the agreements with 2 merchants under the final stages of integration. The share price advanced by 12.5% in the last six months and we put a “Speculative Buy” recommendation at the current market price of $0.18, given the room for more growth and present trading scenario.
 

ISX Daily Chart (Source: Thomson Reuters)
 

The a2 Milk Company Limited

A2M Details

Efforts on growth initiatives: The a2 Milk Company Limited (ASX: A2M) is engaged in the commercialization of a2MC branded milk and related products as supported by the ownership of intellectual property that enables the identification of cattle to produce A1 protein-free milk products. The Company operates through four segments, which include Australia and New Zealand; China and other Asia; the United Kingdom and USA, Corporate and other. On financial front, revenue during 1HFY18 was recorded at $434.7 Mn against $256.1 Mn in 1HFY17, marking a growth of 70% YoY. This reflected market share gains in key products of the company across the regions during the same period. The company’s gross margin in 1HFY18 was recorded at 49.8% vs 46.5% in 1HFY17. This resulted from growth of infant formula and favourable currency movement. EBITDA margins expanded by 786 bps YoY to 32.9% because of topline growth. NPAT came at $98.5 Mn in 1HFY18 from $39.4 Mn in 1HFY17, up by 150% YoY because of reduced effective tax rate from ~37% to ~31% during the same period.
 

Key Financial Chart (Source: Company Reports)
 
The company’s revenue growth is continuing from nutritional products in ANZ and China regions, along with further growth in fresh milk in the United States as the consequence of the Northeast expansion. The focus on growth initiatives is expected from emerging market and new product development in years to come. Since A2M stock has already risen 135.6% in the past six months as on March 05, 2018 with a 44.48% jump in one month, there may be a possibility of retreating given that most of the positives seem to be factored in the price. While the stock looks “Expensive” at the current price of $11.87, we keep an eye on any substantial price dip.
 

A2M Daily Chart (Source: Thomson Reuters)
 

Flight Centre Travel Group Limited

FLT Details
Solid Performance:Flight Centre Travel Group Limited (ASX: FLT) is one the world’s largest travel agency group. The company has owned operation in 23 countries and corporate travel management network in more than 90 countries. It employs more than 19,000 people globally and has total of 2800 businesses. The company has revealed its first half year performance. Revenue for the first half of the year was recorded at $1373.8 Mn as compared to $1303.6 Mn in 1HFY17, marking a growth of 5.4% YoY on the back of business mix changes. PBT increased by 27.7% YoY to $139.4 Mn in 1HFY18 from $109.2 Mn in 1HFY17. NPAT came at $102.2 Mn in 1HFY18 against of $74.4 Mn in 1HFY17, up by 37.2% YoY. The company’s 1H growth was achieved during the period of network consolidation which saw overall sales staff numbers decrease modestly, pointing to further productivity gains. Further, FLT’s business in Europe, the Middle East and Africa again performed strongly with TTV increasing by 16% to $1.4 Bn and profit increasing by 37% to $35 Mn and so the region generated almost 14% of the group sales and about 25% of the group PBT. The transformation program that was initiated late in FY17 to ensure that FLT achieves scalable profitable growth throughout the economic sale has started to gain momentum and the company made a solid progress towards its 7-2-100 targets during the first half of the year. The company also expects further market growth globally as the Golden Era of Travel continues and FLT’s transformation program is expected to deliver 2H benefits.
 

Total Transaction Value (TTV) Trend (Source: Company Reports)
 
However, these efforts would require some additional cost, and so, the 2H cost is expected to increase. Based on strong performance, the board of director declared interim dividend of 60 cents per share with record date of March 23, 2018 and payment date of April 13, 2018. Meanwhile, it was seen that share price has increased in one year by 95.66% (as at March 05, 2018). We give “Hold” recommendation on the stock at the current price of $55.09
 

FLT Daily Chart (Source: Thomson Reuters)

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