Strong third quarter 2018 performance: Afterpay Touch Group Ltd.’s (ASX: APT) stock seems to be regaining some lost potential with a 0.54% rise on April 16, 2018 following a 2% rise seen in last five days, post a 28% drop witnessed in last one month as at April 13, 2018 at the back of some negative sentiments erupting against the group.
 
While APT posted a decent third quarter 2018 performance with the group delivering over 400% growth in the sales for the first three quarters of FY18, compared with the first three quarters of FY17. The company has processed over $1.45b of total underlying sales through the APT platform in first three quarters of FY18 compared with $290m for first three quarters of FY17. The company is now tracking at approximately $2.4 billion on an annualised basis, based on recent monthly performance. However, third quarter FY18 underlying sale has been approximately 3.8% lower than Q2 FY18 sales (which includes Christmas peak season trading uplift) on an absolute basis but is less than 2% lower from an average daily underlying sales perspective (fewer days in Q3 versus Q2). Moreover, there are approximately 14,000 merchants now on-board (up from approximately 11,500 at the end of Q2 FY18). Merchant number growth in the third quarter of FY18 was over 45% higher as compared to Q3 of FY17. Moreover, in the third quarter of 2018, there are over 1.8 million customers, and this number has been up from 1.5 million at the end of Q2 FY18.
 
In a recent media interview, Afterpay’s co-founders have indicated that the group still has the potential to maintain its upward momentum with the ability to be an enduring player in the global retail space despite the challenges related to lending. The group thus aims to continue its focus on the customer. It is key to note that about one fourth of Australian online retail apparel transaction volumes are made using the APT platform. The stock nonetheless is under some scrutiny at the back of latest disputes and developments, while the group has plugged its late payment fee (at 25% of purchase value) and is establishing tougher fraud checks.
 
Looking at the scenario, we give a “Hold” recommendation on the stock at the current price of $ 5.62.
 

APT’s Customer-centric Model (Source: Company Reports)

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