Splitit Payments Ltd

SPT Details

Issue of Shares: Splitit Payments Ltd (ASX: SPT) provides payment solutions that enable businesses and merchants to split the purchase into interest-free instalments with an existing debit or credit card. The market capitalisation of the company as of 7 June 2021 stood at $283.95 million. As per a recent announcement, the company has issued 431,818 fully paid ordinary shares, on exercise of 451,555 unlisted options under the company’s Employee Share Incentive Plan.

Q1FY21 Financial Performance: During the quarter, the company has recorded a hike in MSV by 247% to US$82 million, compared year over year. Splitit has posted revenue growth of 292% to US$2.7 million. In addition, the company has reported an increase to the no. of shoppers by ~70k to ~0.5 million during the quarter. Moreover, Splitit has US$150 million receivables warehouse to support $800 million of annual MSV with Goldman Sachs. The cash position of the company stood at US$75 million as of 31 March 2021. 

Q1FY21 Financial Performance (Source: Company Reports) 

Outlook: The company is anticipating an improved gross margin from H2FY21 because of increase in funding facility from Goldman Sachs. Splitit also executed a growth strategy to invest US$67 million in sales & marketing, product & innovation. In addition, the company might show extensive growth due to its partnership with Google Japan which is now live, and also with UnionPay. 

Key Risks: The company is exposed to credit risk, and lack of access to capital could impact the business operations. The impact of the COVID-19 pandemic has extensively downgraded the economy, which might affect the demand of the consumers.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (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 Recommendations: During the quarter, the company has recorded an increase in total merchant to 2.2k with new brands, including Google, Giant Bicycles, openshop, House of Hackney, APM Monaco, etc. Splitit has a global strategic partnership with UnionPay post-quarter-end, which will provide a global access network of 9B cardholders. The stock of SPT is trading below its average 52-weeks' levels of $0.595-$1.930. The stock of SPT gave a negative return of ~22.49% in the past one year and a negative return of ~0.799% in the past one week. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some premium to its peer average EV/Sales (NTM Trading multiple), considering robust revenue growth and increase in number of shoppers. For this purpose, we have taken peers such as Pushpay Holdings Ltd (ASX: PPH), SmartPay Holdings Ltd (ASX: SPY), Afterpay Ltd (ASX: APT), to name a few. Considering the current trading levels and expected upside in valuation levels, strategic investment, successful global partnership, strong financial result and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.620, as on 7 June 2021.

SPT Daily Technical Chart, Data Source: REFINITIV 

Wameja Limited

WJA Details

Business Update: Wameja Limited (ASX: WJA) is a technology company that provides  global payment services and enables cross-border transfer between bank accounts, cards, mobile wallets, or cash outlets. The market capitalisation of the company stood at $157.41 million, as of 07 June 2021. As per a recent announcement, the company has advised that the Scheme of Arrangement proposed under the Scheme Implementation Agreement with Burst Acquisition Co. Pty. Ltd, has been extended to 18 June 2021. 

FY20 Financial Result: During the period, the company has recorded a loss of ~$9 million, compared to $13 million in FY19. There was a net cash outflow of $3.366 million on the back of outflow from investing activities. The cash position of the company stood at ~$8 million as of 31 December 2021.

Cashflow from Operating and Investing Activities (Source: Company Reports)

Outlook: The company has prepared financial statements on the going concern basis and the director has forecasted sufficient cash flow to operate for the period through to 31 March 2022.

Key Risk: Due to the COVID-19 pandemic, the company has a significant effect on their operations, which is evident in FY20 performance and the uncertainty still prevails. WJA is exposed to foreign currency risk, financial risk and credit risk, which might affect the company’s earnings.

Stock Recommendation: The company has reported an increase in the Average Transaction Value by ~9% in Q1FY21 over the prior quarter, in the performance of HomeSend.  The stock of WJA is trading close to its average 52-weeks’ high levels of $0.071-$0.150. The stock of WJA gave a positive return of ~8.33% in the past six months and a positive return of ~52.94% in the past one year. On a technical analysis front, the stock of WJA has a support level of ~$0.125 and a resistance level of ~$0.15.  Considering the current trading levels, volatile price movements, muted financial performance, continued negative ROE levels and key risks associated with the business, we recommend a ‘Sell’ rating on the stock at the current market price of $0.130, as on 7 June 2021.

WJA Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV. 

Note 2: 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. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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