Stocks’ Details

Sezzle Inc.

Record Quarterly Results: Sezzle Inc. (ASX: SZL) is engaged in the operation of a payment platform. As on 6 November 2020, the market capitalisation of the company stood at ~$1.38 billion. The company has recently released results for the quarter ended 30 September 2020, wherein it reported YoY growth of 231.5% in underlying merchant sales to US$228 million and saw a slight improvement in merchant fees to 5.8% compared to 5.6% in 2Q20. In the same time span, active consumers rose by 178.1% to 1.79 million and active merchants went up by 178.3% to 20,890.

Average Monthly UMS (Source: Company Reports)

Outlook: The company has reiterated its guidance and expects an annualised run rate in excess of US$1.0 billion in UMS in 2020. The company seems well-positioned for the ongoing move to online, as nearly 100% of Sezzle’s transactions are via eCommerce.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company retains a healthy balance sheet with a cash balance of $112.79 million which will help the company to pursue its growth strategies and weather the effects of COVID-19. The stock of SZL gave a negative return of 4.44% in the past three months and a negative return of 11.37% in the last one month. On a technical front, the stock of SZL has a support level of $5.34 and a resistance level of ~$8.76. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target upside of lower double-digit (in % terms). For the said purposes, we have considered FlexiGroup Ltd (ASX: FXL), EML Payments Ltd (ASX: EML), Pushpay Holdings Ltd (ASX: PPH) as peers. Considering the record quarterly results, modest long-term outlook, and valuation, we recommend a ‘Buy’ rating on the stock at the current market price of $7.090, up by 0.424% on 6 November 2020.

Webjet Limited

FY20 Financial Highlights: Webjet Limited (ASX: WEB) provides a full range of online travel booking service for flights, hotels, car hire, cruises, and tours. As on 6 November 2020, the market capitalisation of the company stood at ~$1.41 billion. During FY20, the company witnessed a heavy impact on its financials due to closed borders. During FY20, underlying TTV went down by 21% to $3,021 million and underlying revenue witnessed a decline of 27% to $266.1 million. During the year, the company strengthened its balance sheet through capital raisings and seems well placed to benefit from upcoming opportunities that may arise to gain market share.

FY20 Financial Highlights (Source: Company Reports)

Outlook: Travel industry is a fundamental interconnect to global society and over the time, demand for travel is likely to grow. The company is witnessing strong consumer confidence in its key flights and hotel markets and seems well-placed to capture the pick-up in the travel industry. The company is also expecting a dramatic change in the competitive landscape, particularly in the B2B space where many of its competitors are likely to face severe financial pressures.

Stock Recommendation: The company has a global footprint and a highly diverse customer base and is making a structural shift from offline to online. As per ASX, the stock of WEB is trading close to its 52-weeks’ low levels of $2.250, proffering a decent opportunity for accumulation. The stock of WEB gave a return of 43.34% in the past six months and a return of 35.04% in the last three months. On a technical front, the stock of WEB has a support level of ~$3.17 and a resistance level of ~$6.98. On a TTM basis, the stock of WEB is trading at a price to book value multiple of 1.8x, lower industry average (Consumer Cyclicals) of 5.7x, and thus seems undervalued. Considering the current trading levels, decent balance sheet, key investment risks and modest long-term outlook, we recommend a ‘Speculative Buy’ on the stock at the current market price of $4.20, up by 0.719% on 6 November 2020.  

FlexiGroup Limited

Pricing of $250m humm ABS Transaction: FlexiGroup Limited is engaged in the consumer revolving finance and cards, provides BNPL category of products, Commercial Lease and SME financing services and Consumer Leasing. As on 6 November 2020, the market capitalization of the company stood at ~$477.93 million. The company has announced the pricing of asset-backed securities of $250 million, which is supported by a pool of consumer receivables under its BNPL offering, wherein the Flexi ABS Trust 2020-1 transaction includes:

ABS Trust 2020-1 transaction (Source: Company Reports)

Decent Growth in Customers: During FY20, FXL achieved decent YoY growth of 17% in volume across its products and witnessed an addition of 524k customers to 2.3 million customers across its range of products. During FY20, interest income of the company went up by 2% to $360.2 million due to an increase in BNPL, AU Cards, and NZ Cards, with growth in average receivables over the year.

FY20 Operational Highlights (Source: Company Reports)

Outlook: The company is focused on achieving its reach, target market and audience and is rebuilding focus on expansion into the growing market of equipment finance for SMEs. FXL is working on streamlining the origination process with instant credit decisions. The strong demand for BNPL during COVID-19 has reinforced the value of the product for consumers and highlights the importance of humm for all stakeholders.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of FXL is inclined to its 52-weeks’ low levels of $0.368, proffering a decent opportunity for the investors to enter the market. The stock of FXL gave a negative return of 17.93% in the past three months and a negative return of 10.5% in the last one month. On a technical front, the stock of FXL has a support level of ~$0.723 and a resistance level of ~$1.297. We have valued the stock using the price to earnings multiple based illustrative relative valuation and have arrived at a target upside of lower double-digit (in percentage terms). For the said purposes, we have considered Eclipx Group Ltd (ASX: ECX), Collection House Ltd (ASX: CLH) and Money3 Corp Ltd (ASX: MNY) as peers. Considering the current trading levels, decent returns in the past three months, modest long-term outlook and the increasing market share of humm, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.975, up by 1.036% on 06 November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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