Laybuy Group Holdings Limited

LBY Details

Laybuy Holdings Ltd. (ASX: LBY) operates a payment platform and manages payments through online and in-store via dashboards. It caters to customers in the United Kingdom, New Zealand, and Australia.

Recent Updates: On December 3, 201, LBY was removed from S&P/ASX All Technology Index effective prior to the open on December 20, 2021.

H1FY22 Highlights: Recorded strong momentum in October and November 2021, with Gross Merchandise Volume (GMV) reaching NZ$391 million, an increase of 60% in PcP. Its UK business outperformed with a GMV growth of 95%. The launch of Laybuy App Exclusives resulted in over 80k transactions in September 2021 that drove the UK business. LBY claims that it is one of the top three BNPL provides in the UK, spreading with over 170 active merchants.

It had posted a net transaction margin of 1.5%, slightly down from 1.7% over last year. It had onboarded several new merchants in the ANZ market, and it continued to increase brand awareness through partnerships with major sponsors, including Manchester United, Arsenal football clubs and Super Rugby clubs, due to which its normalized EBITDA loss widened from NZ$8.1 million in H1FY21 to NZ$16.3 million.

On the balance sheet, LBY raised NZ$11.5 million facility from Kiwibank, following which its cash balance improved to NZ$23.0 million as of September 30, 2021. It had NZ$58.4 million available for drawdown under new partners Growth facility that was signed in October 2021.

GMV Trend (Source: Analysis by Kalkine Group)

Key Risks: BNPL is a highly regulated business, and intense competition may squeeze out the profit margin. It has customers in ANZ and UK, volatility in forex rates may invariably affect the realization. The company is reeling under losses due to sizeable merchant costs and marketing spends. Inability to secure funding may affect its expansion plans.

Outlook: LBY is expecting to add 25 new merchants to join App Exclusives. The company plans to launch the Tap to Pay in-store solution covering all of its merchants in the UK. It is progressing to reach annualized GMV of over NZ$1 billion. The company has forged alliances with airlines and healthcare players to become a recognized brand in the UK. LBY is targeting to achieve 60-70% growth in GMV in FY22, with UK growth at 75-85% over the prior year.

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

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: Over the last six months, the stock has been corrected by ~67.48% and is trading below to the average of the 52-week low-high band of $0.150-1.50. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in percentage terms). The company can trade at a slight discount to its peers, considering its losses and intense competition in the BNPL space. For the valuation purpose, peers such as Openpay Group Ltd (ASX: OPY), EML Payments Ltd (ASX: EML), and others have been considered. Considering its position and scalability in the UK region, launch of Laybuy App Exclusives, merchant partnerships programs, optimistic outlook, potential upside as indicated by the valuation, and key associated business risks, we give a “Speculative Buy” rating on the stock at the current market price of $0.165, as on 10 December 2021, 10.30 AM (GMT+10), Sydney, Eastern Australia.

LBY Daily Technical Chart, Data Source: REFINITIV

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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