Openpay Group Limited

OPY Details

Key Highlights from AGM: Openpay Group Limited (ASX: OPY) is a Buy Now and Pay Later (BPNL) company payment solution provider. OPY offers OpyPro, a SaaS (Software as a service) based platform for firms to manage trade accounts.

• OPY maintained a robust volume growth dynamic and witnessed an increase of 77% YoY in the TTV (total transaction volume) to ~$340 million in FY21. The company expects further growth in TTV post the completion of the Payment Assist acquisition.
• In FY21, OPY’s Active Plans increased a whopping 141% on pcp, driven by the continued recovery of bricks and mortar growth rates in the company’s Healthcare and Automotive verticals.
• In FY21, OPY’s Active Customers increased 69% year over year, owing to strong customer engagement from the UK. The company recorded an increase of 77% in Active Merchants in FY21, due to the latest integrations with eCommerce platforms and point of sale provider partnerships.

A Quick Look at 1QFY22 Results:

• During the quarter, the TTV went up a whopping ~51% YoY, owing to robust volume growth. The company recorded ~56% YoY growth in active customers in Q1FY22.
• The company’s ANZ vertical inked various deals with a record number of key merchants, major platforms, and aggregator partners in order to boost merchant growth by 84% y-o-y in 1QFY22. This, in turn, is expected to aid the growth of TTV and Revenue in Q2FY22.
• The company strengthened its foothold in the UK, continued to gain impetus during the quarter and expanded its bigger ticket retail offerings.

Active Customers Highlight (Source: Analysis by Kalkine Group) 

Key Risks: The company’s line of business makes it prone to stiff competition from peers in the BNPL space. Also, changing government policies & regulations along with currency fluctuations risks in the international market add to the woes.

Outlook: The company expects to drive market expansion in the US & UK, by strengthening market-leading positions in traditional verticals, owing to the large merchant and aggregator deals. For FY22, OPY is planning to go strong in mergers & alliances domestically and internationally. It plans to announce a pipeline of new B2B partnerships for OpyPro, Australia in Q2FY22 and unveil a new e-commerce customer journey across all key markets.

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 three months, the stock has provided a negative return of 24.45% and is trading lower than the average 52-weeks’ price level band of $1.022 and $3.57. The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company can trade at a slight discount to its peers, considering its negative cash flows in Q1FY22, mounting losses, integration risk, etc. For the purpose of valuation, peers like Prospa Group Limited (ASX: PGL), Money3 Corp Ltd (ASX: MNY), and Eclipx Group Ltd (ASX: ECX), have been considered. Considering the rise in top-line, funds infusion, expected TTV and customer growth in FY22, various strategic alliances, geographical expansion, current trading levels, and indicative upside in the valuation, we give a “Speculative Buy” rating on the stock at the closing market price of $1.035, down by ~2.359% as on 25 November 2021.

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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