Openpay Group Limited

OPY Details

Resolutions Cleared: Openpay Group Limited (ASX: OPY) is a provider of buy now pay later (BNPL) payment solutions to healthcare, automotive, home improvement, education verticals. OPY offers OpyPro, a SaaS (Software as a service) based platform for firms to manage trade accounts. OPY recently held its AGM (Annual General Meeting) on 15 November 2021 and passed all resolutions stated in the meeting notice issued via polls.

The company held an online investor briefing on 28 October 2021 and highlighted the following results of Q1FY22 (30 September 2021):

• The revenue stood at ~$7.0 million, up by +10% YoY in Q1FY22.
• The TTV (Total Transaction Value) rose to ~$103 million, up by ~51% YoY in Q1FY22 due to strong volume growth.
• The company recorded the highest increase in active merchants to ~4.3k, up by ~87% YoY in Q1FY22. ~85% of new plans were reported to be from repeat customers during the quarter.
• The active plans amounted to ~2.2 million, depicting a rise of ~110% on pcp due to robust contribution from OPY’s retail vertical due to COVID-19 lockdowns.
• During Q1FY22, OPY entered the UK healthcare vertical, expanded its bigger ticket retail offerings, launched OpyPay product in the US.
• OPY witnessed growth momentum for OpyPro in Australia, its new B2B SaaS-based product. The accompany added Woolworths, HP, and Kogan as its enterprise customers and signed a partnership with Kyriba in the US.

 TTV & Revenue from Q1FY21-Q1FY22 Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of forex changes due to international operations, technological disruptions leading to increased platform investments.

Outlook:

• In Q1FY22, OPY rolled out payment plans in partnership with ezyVet and expects more veterinary practices to go live in Q2FY22 in the UK. Post-approval from the FCA (Financial Conduct Authority) for the acquisition of Payment Assist, OPY estimates the UK revenue would grow from £2.4 million to £8.4 million and robust transaction margins.
• OPY expects that the robust US demand for plans and its OpyPay and OpyPro products will lead to transformational growth of the Group in the next there (3) years. The US firm would contribute ~2/3 of the business.
• OPY expects a step-change in TTV growth in FY22 due to market growth in Australia, expected closure of Payment Assist acquisition, an entry in the UK healthcare vertical, and US volumes.
• OPY plans to announce a pipeline of new B2B partnerships for OpyPro, Australia in Q2FY22.

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 Recommendation: The stock of OPY gave a negative return of ~8.84% in the past three months and a negative return of ~33.23% in the past six months. The stock is currently trading near its 52-weeks’ low level of $1.110. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average EV/Sales multiple, considering its negative cash flows in Q1FY22, increase in debt in FY21, continuing net losses from FY18-FY21, and integration risk. For this purpose of valuation, a few peers like Money3 Corp Limited (ASX: MNY), Eclipx Group Limited (ASX: ECX), Prospa Group Limited (ASX: PGL), and others have been considered. Considering the current trading levels, growth in revenue, TTV, active customers, vertical expansion, launch in the US, growth of OpyPro clients in Australia, expected TTV growth in FY22, the expected UK revenue growth, valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.185, as of 16 November 2021, 11:02 AM (GMT+10), Sydney, Eastern Australia.

OPY 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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