Openpay Group Limited

OPY Details

FY21 Financial Performance: Openpay Group Limited (ASX: OPY) provides payment technology solutions that offer Buy Now Pay Later (BNPL) payment solutions in Australia, New Zealand, the United Kingdom, and the United States. 

• Increased Revenue Growth- The company has recorded a 44% revenue growth of $26.31 million in FY21, compared to $18.25 million on a pcp basis, owing to an increase in active merchants by 77% and active customers to 541k.
• Strong TTV Performance- In FY21, the company has reported a strong total transactional value (TTV) of $339 million, up by 77% from $193 million in FY20.
• Increase in Net Loss- The company has reported a statutory net loss of $63.05 million in FY21 against a loss of $35.40 million in FY20, impacted due to increase in operation expenses during the year.
• Liquidity Position- The company’s cash position stood at $52.07 million as of 30 June 2021 vs $70.05 million as of 30 June 2020.

Active Customers Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Technology Risk- The company is exposed to cybersecurity risk, technology risk, fraud, threats. Therefore, the company should invest in technology to keep it updated and secured.
• Economic Risk- The customer's spending power has affected during the COVID-19 pandemic, and if further uncertainty prevails, might impact the company's financials.

Outlook:

• Openpay UK strategies involved expanding expand its business in the Healthcare vertical with ezyVet. Further, the collaboration with Pennard Vets veterinary group, an ezyVet customer, will support executing instore to a consumers payment plan early FY22.
• The company is on track to grow as a B2B solution for enterprise customers, which might drive bottom-line growth in the near-term future.
• The company focuses on launching Opy Pro + Credit product with its partner Lumi in FY22. Moreover, it continues to invest in new technology and strengthen the core business, which might deliver higher transaction margins and stronger portfolio performance in the medium term.
  

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

Source: 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 OPY is currently trading below its average 52-weeks' levels of $1.110-$3.570. The stock of OPY gave a negative return of ~52.40% in the past one year and a positive return of ~9.05% in the past one month. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ average EV/Sales multiple, considering the competition risk, cybersecurity risk, and liquidity risk to support the new acquisitions, etc. For the purpose of valuation, peers such as Sezzle Inc (ASX: SZL), Harmoney Corp Ltd (ASX: HMY), Eclipx Group Ltd (ASX: ECX) and others have been considered. Considering the current trading levels, indicative upside in valuation, decent topline growth, expanding its footprint, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $1.380, down ~0.362% as on 22 October 2021.

OPY Daily Technical Chart, Data Source: REFINITIV 

SelfWealth Ltd

SWF Details

Q1FY22 and FY21 Financial Highlights: SelfWealth Ltd (ASX: SWF) provides an online investor community portal service that enables online share trading in Australia and the US.

• The company has posted robust revenue growth of $18.4 million in FY21, up 136% from $7.8 million on a pcp basis, driven by an increase in Active Traders, Annual Trades and Client Cash.
• The company has recorded an increase in its operating revenue by 32% to $5.5 million in Q1FY22, compared to $4.2 million in Q1FY21.
• Additionally, it has reported an active trader of 107,461 in Q1FY22, up to 86% from 57,816 in Q1FY21.
• It has reported a decline in its net loss of $0.6 million in FY21 against a loss of $3 million in FY20, driven by ultra-low interest rates globally and the digitalisation of investment markets.
• The company's cash position stood ~ $7.5 million as of 30 June 2021 vs ~$5.3 million as of 30 June 2020.

Cash and Cash Equivalent Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Liquidity Risk- The company is exposed to liquidity risk to encounter difficulties settling its debts and meeting its financial obligation.
• Volatility Risk- the company is exposed to price volatility risk, which could impact the company's operations.

Outlook:

• The company is on track to roll out cryptocurrency and expand into a new international market in Q2FY22.
• The company focuses on developing new products, increasing platform functionality, diversified revenue, and aggressive marketing strategies that might drive growth going forward.
• It expects ultra-low global interest rates, and the continuing digitisation of investment markets might contribute to further growth.

Stock Recommendation: The stock of SWF is trading below its average 52-weeks' levels of $0.300-$0.795. The stock of SWF gave a negative return of ~6.94% in the past one week and a negative return of ~36.19% in the past nine months. On a TTM basis, the stock of SWF is trading at an EV/Sales multiple of 4.4x, lower than the industry average (Investment Banking & Investment Services) of 11.9x, thus seems undervalued. Considering the current trading levels, strong top-line growth, increase in active traders, optimistic outlook, current trading level, valuation on a TTM basis, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.335, down by ~2.899% as of 22 October 2021.

SWF Daily Technical Chart, Data Source: REFINITIV 

QuickFee Limited 

QFE Details

Q1FY22 Key Highlights: QuickFee Limited (ASX: QFE) is a global fintech company that provides payment and lending solutions. It enables online payments, financing and BNPL services Australia and the United States.

• The company has recorded the strong US with Pay Now transaction value of US$180.1 million in Q1FY22, up 42% from US$127.2 million on a pcp basis.
• In Q1FY22, it has reported an increased US active customer by 34% to 62.3k compared to 46.6k in Q1FY21.
• Additionally, the Australian region has shown decent growth in its key metrics. For example, it has reported an increase in its lending to A$8.2 million, up 28% on a pcp basis, reflecting a rise in lending demand.
• The cash position of the company stood at $21.3 million as of 30 June 2021 vs $15.0 million as of 30 June 2020.

US Active Merchants (Source: Analysis by Kalkine Group)

Key Risks:

• Liquidity Risk- The company requires sufficient liquidity to meet its financial obligations, lend more customers, and mitigate the working capital risks.
• Foreign Currency Risk- The company’s operations are exposed to the global market, due to which the company could face the foreign currency risk.

Outlook:

• The company focuses on identifying strategic partnership opportunities to increase its lending business in the Australian region at a faster growth rate.
• The management is on track to improve its direct and enterprise sales by penetrating the top 400 enterprise CPA firms in the US.
• The company continues to collaborate with larger multi-merchant organisations and ISOs, which might drive growth in the near-term future.
• The company’s new Merchant Direct application platform enables a direct onboarding of merchants that might support the growing demand, going forward.
• Recently, the company has changed the virtual investor day to 19 November 2021.

Stock Recommendation: The stock of QFE is currently trading below its average 52-weeks' levels of $0.165-$0.570. The stock of QFE gave a positive return of ~11.76% in the past one week and a negative return of ~51.89% in the past nine months. On a TTM basis, the stock of QFE is trading at a Price/Book multiple of 1.6x, lower than the industry median (Professional & Commercial Services) of 2.9x, thus seems undervalued. Considering the current trading levels, valuation on a TTM basis, increasing lending demand in the Australian region, decent merchant engagement performance in the US region, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.180, as of 22 October 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

QFE 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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