Afterpay Touch Group Ltd (ASX: APT)

 Strategic relationship with Matrix Partners:Afterpay Touch Group Ltd (ASX: APT) is looking to expand in other markets apart from New Zealand. Therefore, the co-founder Nick Molnar, is currently investigating opportunities to introduce APT in the United States market. The company has entered into a strategic relationship and new share issuance transaction with Matrix Partners, who has a strong understanding of US market dynamics, its relationships with relevant local key stakeholders, as well as its knowledge base and access to the best in-market talent from both a ‘go-to-market’ and technology innovation perspective. Thus, the efforts on US expansion front and reproducing the Australian set-up can help the group fetch more profits.
 
For three months’ period ended 31 December 2017 (i.e., Q2 FY18), APT had reported underlying quarterly sales of $551m up from $367m in Q1 FY18 and up from $103m in Q2 FY17. Underlying sales of $918m for H1 FY18 was up from $145m in H1 FY17 and tracking in excess of $2.0bn on an annualised basis based on recent quarterly performance. Consolidated revenue for the six-month period ending 31 December 2017 has been flagged to be in the order of $60m (including other income) and EBTDA (prior to one-off expenses and non-cash share-based expenses) to be in the range of $11m - $12m.
 
The Company now has 11,500 merchants on-board, up from 8,700 at end of Q1 FY18. It is worth noting that customer demographic profile has continued to broaden as market reach and instore presence continue to expand. Given the developments, the group expects net transaction loss for H1 FY18 to be below 0.8% of underlying sales.
 
As a result, APT stock has risen 26.15% in three months as on February 08, 2018. Based on the foregoing and the stock being at a slightly high level despite a 9% fall in last five days, we give a “Hold” recommendation on the stock at the current price of $6.60

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