Openpay Group Ltd

OPY Details

Business Update: Openpay Group Ltd (ASX: OPY) is a SaaS-based platform that provides BNPL payment solutions with flexible plans to pay to Customers and Merchants in Australia, New Zealand, the UK and the US market. The market capitalisation of the company as of 2 July 2021 stood at ~$ 198.77 million. As per a recent announcement, the company’s director Mr. Michael Eidel, has undergone a change of interest in the company and has acquired 65,000 Fully Paid Ordinary Shares at a price of $1.52.

Strategic Investment: The company is set to acquire Payment Assist, the leading BNPL provider in the UK Automotive sector; the first international expansion provides an opportunity to expand TTV and revenues further. OPY is expected to acquire Payment Assist for £11.5 million upfront, with an earn-out component of up to £17 million. The transaction is expected to be completed in H1FY2022.

Q3FY21 Financial Performance: During the quarter, the company has reported an uptick in transactional value by 80% to ~$83 million in Q3FY21, compared on a pcp basis. OPY has recorded revenue growth of 24% to $6.6 million, compared on a pcp basis. During the period, key agreements were signed with leading brands like Officeworks and Ford and the company also entered the hospital sector. In addition, the company has strengthened its balance sheet position through $67.5 million through equity, SPP, debt, etc. that could support the company to streamline its strategic investment for sustainable growth.

Revenue Trend (Source: Company Reports)

Outlook: The company continues to witness accelerating growth and the major focus is to disrupt major payments markets with its relevant offerings for merchants and consumers.

Key Risk: OPY is exposed to credit risk, efficiency risk, compliance risk, fraudulent risk, technology, cybersecurity risk and opportunity cost risk. Therefore, the company should invest in its technology to make it secured and updated to mitigate the risk.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: 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: The stock of OPY is trading below its average 52-weeks' levels of $1.400-$4.980. The stock of OPY gave a negative return of ~3.25% in the past one month and a negative return of ~34.29% in the past six months. 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 a slight discount to its peer average EV/Sales (NTM trading multiple), considering the uncertainty over COVID-19 impact and increase in debt to equity ratio. For this purpose, we have taken peers such as Money3 Corp Ltd (ASX: MNY), Sezzle Inc (ASX: SZL), etc., to name a few. Considering the current trading levels and expected upside in valuation levels, economic recovery, strategic acquisition, expanding its footprint in the global market, robust balance sheet and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $1.490, down by 1.974% (as on 2 July 2021, 10:39 PM (GMT+10), Sydney, Eastern Australia).

OPY Daily Technical Chart, Data Source: REFINITIV

Zimi Ltd

ZMM Details

Trading Update: Zimi Ltd (ASX: ZMM) specialises in Internet of Thing (IoT) that provides real-time evaluation of environmental and risk factors for building occupants, as well as managing services and utilities. The market capitalisation of the company as of 2 July 2021 stood at ~$10.25 million. As per a recent trading update, the company has received an order to deliver 30,000 devices to GSM-Electrical, Beacon Lighting Group and Steel Line Garage Doors that represent revenue of over $1.7 million.

Scheduled Campaign: The company has agreed to a co-marketing campaign with Beacon Lighting worth $100,000 which will be equally invested, and the campaign includes the creation of specific content around the renovation show, social media and influencer marketing, etc, that schedule to run until July 2022.

Q3FY21 Financial Performance: During the quarter, the company received orders amounting to 17,000 devices that represents revenue of more than $1 million. ZMM has reported product manufacturing costs of $506,000 which includes the securing of chips and commercialization of existing product. The company has recorded net cash outflow from operating activities at $1.43 million in Q3FY21. The cash position of the company stood at $1.77 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: ZMM has spent $372,000 on R&D to develop, enhance the new offering for clients. Q3FY21 sales has increased the company’s expectations in near-term future. ZMM is securing its working capital to support the manufacturing cost.

Key Risks: Due to COVID-19 pandemic, unemployment, lockdown have impacted the company's cashflow and its operations and uncertainty still prevails in near-term future.

Stock Recommendation: As per the recent announcement, the company has appointed Simon Gerard to serve as a non-executive Chairman and agreed with no fees for his first twelve months in the role. The stock of ZMM is trading below its average 52-weeks' levels of $0.012-$0.038. The stock of ZMM gave a positive return of ~44.00% in the past one year and a negative return of ~9.99% in the past six months. On a technical analysis front, the stock of ZMM has a support level of ~$0.0125 and a resistance level of ~$0.0375. Considering the recent rally in the stock price, negative cash flows from operating activities during the quarter and the key risks associated with the business, we give a 'Sell' rating on the stock at the current market price of $0.019, up by ~11.764% as on 2 July 2021.

ZMM Daily Technical Chart, Data Source: REFINITIV

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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