Tyro Payments Limited

TYR Details

Business Update: Tyro Payments Limited (ASX: TYR) is engaged in the provision of payment solutions and business banking products. The market capitalisation of the company as on 26 April 2021 stood at ~$1.99 billion. As per a recent update on its business performance, the company has reported an uptick in the transaction value by ~18% to $20.083 billion for the year-date period till April 2021, compared to the pcp.

H1FY21 Performance Update: During the period, the company reported record 36,720 merchants using its payments solution. The transactions processed by Tyro merchants stood at $12.1 billion in H1FY21, an increase of ~10% on the pcp. This resulted in an increase in the gross profit by ~16% to $54.3 million during the period. EBITDA grew by a significant ~464% to $8.5 million.

H1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company is subject to peer competition in its line of business, and disruptions to the payment market by the new operators may result in pricing pressure.

Outlook: The company will look to rebuild the trust amongst the merchants, who were impacted by the terminal connectivity issue on 5 January. It has continued to witness growth in the transaction value in the second half of FY21. It also experienced decent growth in e-commerce transactions to $3.9 million in January 2021.

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 Recommendation: The company has announced the appointment of Aliza Knox to its Board of Directors, effective from 21 April 2021. The stock of TYR is trading above its average 52-weeks’ levels of $2.310-$4.400. The stock of TYR gave a positive return of ~49.80% in the past three months and a positive return of ~41.88% in the past one year. On a technical analysis front, the stock of TYR has a support level of ~$3.247 and a resistance level of ~$3.994. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a correction of low single-digit (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple), considering the impressive growth in transaction value, decent financial performance and the increased traction in e-commerce transactions. For the purpose, we have taken peers such as EML Payments Limited (ASX: EML), Zip Co Limited (ASX: Z1P), Splitit Limited (ASX: SPT), to name a few. Considering the current trading levels, valuation, recent rally in the stock price and higher assets to equity ratio of 1.66x, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the current market price of $3.760, down by ~4.082% as on April 26, 2021.

TYR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: 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.

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