Afterpay Touch Group

APT Details

Afterpay Touch Group Ltd (ASX: APT) is a fintech company that has been formed by merging two digital payment companies, Afterpay and Touchcorp.Both the entities have individually illustrated growth prospects before the merger with Afterpay’s “buy now, pay later” technology and partnerships with many enterprise scale retailers, and Touchcorp’s great pie of recurring revenue.

Venturing into travel industry: APT stock has risen about 9.5% on September 13, 2017 while the group announced about inking an agreement with Jetstar, the Qantas Group’s (ASX: QAN) low cost airline. This move is the first of a kind and indicative of APT’s introduction of its “buy now, pay later” venture into the travel industry. Under this, the APT’s “buy now, pay later” payment option is said to be initially made available online across Jetstar’s domestic flights and products. Going forward, this can pave the way to extend the service to more domestic services and international flights. Further, with this partnership, the group will be targeting a market wherein millennials are very active and there has been a growth in spend on travel as a percentage of disposable income. 

APT’s Retail Partnerships (Source: Company Reports)

Performance boost from rapid customer growth: In the month of August 2017, the group updated that many of the Australia’s leading and largest retailers and several global brands have integrated with Afterpay in the last one year and the number of integrated retail merchants has risen to over 7,200. The group has been witnessing rapid customer growth (increased to over 1 million customers) with repeat usage of the Afterpay system. Further, APT’s FY17 underlying sales were over $560 million and underlying annualised sales were in excess of $1.2 billion. The merchant fees were up from $1.4 million in the prior year to $23 million. Moreover, the group’s capability has been improving as the net transaction loss rates have declined (0.6% for FY17) during a period of exponential underlying sales growth.
 

Financial Result (Source: Company Reports)

Building growth pipeline: Afterpay is also being launched in New Zealand in association with Trade Me and other high-profile brands. The group expects to have many enterprise retailers on-board in both Australia and New Zealand this year. Growth is also expected from strategic relationships with Tyro, Big Commerce and others.

Overall, the group’s transaction and operating profitability with new partnerships and deals, and technology based services are expected to drive momentum going forward. The stock has moved up 48% up till now, as at September 12, 2017, and is expected to witness more upside momentum. We give a “Speculative Buy” on the stock at the current price of $ 4.38


APT Daily Chart (Source: Thomson Reuters)

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