Afterpay Limited (ASX: APT)

APT provides technology-based payment solutions to customers and merchants through its Afterpay and Pay Now Services. Its operating segments include Afterpay Asia Pacific, Afterpay North America, and Clearpay and Pay Now. It serves customers in Australia, New Zealand, Asia, the UK, and the US markets. APT was listed in ASX on June 29, 2017.

Merger Updates with Block Inc. (formerly known as Square, Inc.):

• On January 12, 2022: Block Inc. received approval from the Bank of Spain in respect of the acquisition of Afterpay by Block’s wholly-owned indirect subsidiary, Lanai (AU) 2 Pty. Ltd.
• Following the approval, the trading of APT was suspended in ASX at the close of trading on January 19, 2022.
• The shares of APT were removed from the S&P/ASX 200 Index prior to the opening of trading on January 20, 2022.
• On a deferred settlement basis, shares of Block Inc. CHESS Depository Interests (CDIs) began trading on ASX under the ticker ‘SQ2’ effective January 20, 2022. Shares of CDIs represent class A common stock of SQ2 in the ratio of 1:1.
• Trading of CDIs Block Inc. shares (SQ2) on a normal settlement basis will commence on February 02, 2022.
• The scheme will be implemented with scheme consideration provided to shareholders on February 01, 2022.
• Commencement of trading of new Block shares on NYSE to kick on February 02, 2022.
• As mentioned in the scheme booklet, post-acquisition of all APT shares by Lanai (AU) 2 Pty. Ltd., APT shareholders will receive 0.375 Block Class A Shares or CDIs per Afterpay share they own. Investors who hold Afterpay Shares on the Record Date (other than Ineligible Foreign Shareholders) will be provided with the Scheme Consideration in exchange for their Afterpay Shares. As per the announcement on January 12, 2022, record date for determining entitlement of scheme consideration by shareholders is set as 7:00 PM (AEDT) January 21, 2022.
• The DRS statements for new Block Inc. shares will be dispatched to shareholders on February 03, 2022.

Conclusion:

On account of acquisition by Block Inc. through its indirect subsidiary, Lanai (AU) 2 Pty. Ltd. trading of APT was suspended in ASX and it was last traded on January 19, 2022. The new Block Inc. CDI shares began trading in ASX on a deferred settlement basis on January 20, 2022. Given the backdrop of aforesaid arrangement, APT is no longer trading on the ASX exchange. Therefore, the position on APT has been closed at the last traded price of $66.47 as on 19th January 2022.

APT Daily Technical Chart, Data Source: REFINITIV 

Note: The green color line in the chart depicts RSI (14-period), while the purple color line represents 50-Period SMA.

Airtasker Limited

ART Details

 Q1FY22 Trading Update: Airtasker Limited (ASX: ART) operates a marketplace providing outsourcing services. Its platform connects people who need outsourced tasks in the areas of home cleaning, furniture assembly, computer, and IT support, among others. It caters to its customers in Australia.  

ART provided decent trading results for the quarter ending September 2021 (Q1FY22) with the notable points below:

• Gross Merchandise Volume (GMV) posted a 6.2% growth to reach $35.0 million in Q1FY22 over the previous year. The marketplace witnessed decent growth during the lockdown restrictions. The easing of restrictions in Sydney and Melbourne has led to a sharp recovery in GMV with an annualized run rate of $185 million.
• The international market posted a phenomenal growth of over 100% driven by the UK and Zaarly integration. The US expansion is progressing well with the launch of services in Dallas, Kansas City, and Miami.
• Cash receipts from customers grew 2.3% to reach $6.5 million and it had posted operating cash outflows of $4.08 million due to heightened staff costs and administration expenses. It had closed the quarter with a cash balance of $40.18 million as of September 30, 2021.
• During the quarter, ART appointed Patrick Collins as Chief Product Officer. He was the former Chief Technology and Product Officer at Zip Co.

Key Takeaways in 2021 Results:

• Revenue reported astonishing 38% growth in FY21 to $26.6 million led by 415k unique paying customers and GMV reaching $153.1 million, far exceeding forecasts.
• Gross margin at 93% and gross profit grew 39% to $24.8 million in FY21 over the prior year.
• It had reported a statutory net loss of $9.71 million in FY21 as compared to a loss of $10.25 million in PcP.

Key Financial Highlight (Source: Analysis by Kalkine Group)

Key Risks: ART offerings are highly discretionary and factors like the unemployment rate, wage growth, savings ratio influence household spending and alter the sales volume growth. Increasing competition in the online marketplace may affect margin expansion. Higher supplier and vendor concentration risks erode the pricing power.

Outlook: The company aims to hit annualised GMV run rate of $8-$10 million by June 2022. The integration of Zaarly is also progressing with the launches in Dallas, Kansas City, Miami, and Atlanta. The company intends to grow its marketing investment particularly in the second half of FY22. It plans to launch second marketplace model listings.

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:  The stock of the company has been corrected by ~26.01% in the past one month. Currently, the stock is trading below the average of its 52-week low and high levels of $0.605 and $1.965, respectively. The stock has been valued using the 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 might trade at a slight discount than its peers, considering the heightened competition and highly discretionary nature. For the purpose of its valuation, peers like Carsales.Com Ltd (ASX: CAR), REA Group Ltd. (ASX: REA), Seek Ltd. (ASX: SEK), and others have been considered. Considering the decent GMV growth in Q1FY22, international expansion plans, adequate liquidity, indicative upside in the valuation, current trading levels, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of $0.640, up ~1.59%, as on 28 January 2022.

ART 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 for 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 is 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 the 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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