Laybuy Group Holdings Limited

LBY Details

Laybuy Group Holdings Limited (ASX: LBY) is a leading BNPL provider in ANZ and the UK. It offers a fully integrated payment platform to its customers.  The company has a market capitalisation of around $110.69 million as on 30^th July 2021.

Q1FY22 Update (Ended 30 June 2021)

Annualised Income Increased by 70% YoY: The company reported annualised GMV of NZ$738 million for Q1FY22, an increase of 58% on Q1FY21, largely on significant contributions from  UK’s GMV which grew  by 107% YoY to $398 million. Annualised income was reported at $41.5 million, an increase of 70% on Q1FY21. The growth in revenues and income could be attributed to an increase in  active customers and active merchants across all regions.

Active Customers Increased by 75% YoY: NTM increased to 2.0% of GMV for the quarter, up from 0.5% in Q1 FY21. Active customers increased by 75% to 829,000. Repeat customers continued to increase in all regions with ANZ recording growth from 68% to 72% and the UK recording growth from 56% to 62%.  Active merchants increased by 84% YoY to over 10,000, with the UK  registering a growth of 424% YoY.

Key Data (Source: Company Reports)

Result Performance (Year Ended 31 March 2021 – FY21)

Revenue Increased by 138% YoY: Revenue income for the period stood at NZ$32.6 million, an increase of 138%  YoY. It recorded a gross merchandise value of NZ$589 million in FY21, up  159% YoY. The number of active customers increased by 87% YoY and active merchants by 75% YoY in FY21. Net Transaction Margin (NTM) for FY21 at $10.74 million grew significantly against -$19k in FY20.

Reduction in Total Liabilities: Net asset position of the company stood at NZ$36.7 million, up from a net liability position of NZ$0.75 million in the previous year. The growth in net asset position could be attributed  to the capital raised via the IPO in September offset by the losses for the period. The customer loan book continues to grow in line with GMV growth. The total liabilities in FY21 were reduced to $23.3 million as a result of converting convertible notes into equity.   The  cash balance at the end of the period stood at NZ$15.48 million. 

Outlook:

During the first quarter of FY22, 743 UK merchants signed with LBY such as Sports Bike Shop, Fanatics, Stichd, Oasis Stores and Warehouse Fashion. Around 1,126 ANZ merchants signed  the company including JD Sports and Motor Trading Association (MTA) in New Zealand; Adore Beauty, Boardriders, City Beach, Stateside Sport, Colette and Missy Empire in Australia. The company completed a capital raise of A$40 million during the quarter, which is expected to support further acceleration of growth in the UK. Besides,  the company finalized a strategic partnership with Awin, Rakuten and Sovrn, which is expected to provide LBY’s customers with access to over 5,000 merchants in the UK over the course of FY22, including household brands ASOS, Nike, Marks & Spencer, Amazon, Boots, easyJet, Booking.com and eBay.

In the meanwhile, the company has provided an outlook for FY22 whereby it expects GMV of NZ$1 billion, income to grow to 90%-100% on FY21, and NTM to continue to improve on FY21.

Key Risks:

The company faces the risk of new customer acquisition, decreased consumer spending, and severe movement in foreign exchange prices. As the firm operates a payment platform, it is exposed to the risk of technical glitches in transaction processing.

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

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

Stock Recommendation:

The company’s debt-to-equity ratio for FY21 stood at 0.31x, lower than the industry median of 0.49x, implying a decent leverage position of the company. Moreover, the company’s reduction of total liabilities and a decent cash balance are expected to support it in its future growth endeavor.

We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price that reflects a rise of low double-digit (in % terms). We have assigned a discount to EV/Sales Multiple (NTM) (Peer Average) considering the risks associated with the business.

Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.430 per share, down by 1.150% on 30^th July 2021.

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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