Afterpay Touch Group Limited

Strong Growth in Australia and New Zealand: Afterpay Touch Group Limited (ASX: APT) is a payments company and operates two businesses namely, Afterpay and Touchcorp. The company recently updated on the letter sent to the shareholders for the deferral of the Share Purchase Plan until the company has considered the final audit report to be prepared by the external auditors, appointed by AUSTRAC and its recommendations.

Changes to the Board: In another update, the company announced recent changes to the Board with the appointment of Anthony Eisen as the CEO & Managing Director, Elana Rubin to the role of Interim Chair and David Hancock as the Group Head. Frerk-Malte Feller was appointed as the new Global Chief Operating Officer.

Financial Highlights: During the six months ended 31 December 2018, underlying sales amounted to $2.3 million, reporting an increase of 147% or $1.4 billion on the prior corresponding period.The number of active customers at the end of the period was reported to be over 3.1 million active customers, up 118% on pcp. Total income generated during the period amounted to $116.1 million, depicting an increase of 91% on pcp. Afterpay merchant income during the period amounted to $88.9 million as compared to $37.1 million in pcp.


Key Financial Metrics (Source: Company Reports)

In the six months period, the company reported strong growth in Australia and New Zealand with 2.6 million customers and 23,400 retailers having transacted with Afterpay in the last 12 months. The company is working with I-MED Radiology Network to trial the Afterpay service in imaging which will lead to a successful expansion into the dental and optometry segments. In the US, the company is on track to reach over 1 million active customers and 2,000 active merchants within 11 months of operations.

Mid-term Growth Strategy: The company’s near-term focus is on accelerating the US and international growth through investment in key brand relationships and platform innovation. In the second half of the year, an additional investment of $10 million in mid-term growth acceleration investment activities is being planned. The company expects its growth strategy to bring significant operating leverage and EBITDA growth, while it scales towards FY22 end target of over $20 billion in underlying sales.

Stock Recommendation: The company has reported a robust performance in 1HFY19, especially with respect to an increase in active customers and merchants as compared to pcp. The period was also characterised by a strong balance sheet to support growth. In addition, the company is working well towards its growth target through the mid-term three-year plan as discussed above. The stock of the company generated returns of 150.63% over a period of 1 year. YTD returns from the stock have been reported at 114.08% and is trading slightly towards a 52-week higher level of $28.760. The company will announce its full year results, which is tentatively to be released on 26 August 2019. Given the backdrop of the above-mentioned facts and current trading level, we have a watch stance on the stock at the current market price of $25.590, down 0.389% on 10 July 2019.
 

Splitit Payments Ltd

Record Breaking Quarterly Performance: Splitit Payments Limited (ASX: SPT) is a technology company providing cross-border credit card-based instrument solutions to businesses and retailers.

Recent Partnerships: The company recently updated on the agreement signed with Kogan.com Limited for providing its instalment payment solutions through Kogan.com, in Australia. The new agreement is in line with the company’s strategic vision to partner with Australia’s largest retailers and providing consumers an easy way to pay for purchases.

Splitit entered into another partnership with EFT Payments (Asia) Limited for a period of three years. As a part of the agreement, EFTPay is required to pay fees to the company based on the transaction volume processed while attaining minimum annual targets for merchant transactions using Splitit solution. The company expects to generate revenue of US$2.5 million to US$5 million over the life of the contract.

Highlights of Q1CY19: During the quarter, the company saw 57 new active merchants coming in, reporting a year-on-year increase of 103%.Underlying merchant transactions in the quarter increased by 168% year-on-year to AUD$32.8 million. The period was marked by transactions with 42,000 new shoppers, taking the total number of unique shoppers to the end of Q1 to 160,000.


Performance Metrics (Source: Company Reports)

Outlook: The company’s global sales pipeline is extensive and continues to thicken with both direct and distribution channels expected to accelerate growth as the IPO funds applied to sales and marketing start to deliver results.

Stock Recommendation: The stock of the company generated returns of -60.24% over a period of 3 months. The company witnessed record breaking performance in the first quarter of CY19 with remarkable growth in the number of active merchants. The company now has 437 active merchants operating in 27 countries. In addition, the company has also signed multiple high turnover merchants that are expected to go live in the second quarter. In addition, the company maintained zero debt losses from over 160,000 transactions. Overall, Splitit continued to experience strong growth across its key performance metrics in the first quarter. In addition, the company is also seeking growth through recent partnerships including those with Kogan.com and EFT Payments. Currently, the stock is trading close to a 52-week lower level of $0.305. Hence, considering the above-stated factors and current trading level, we give a “Speculative Buy” rating on the stock at the current market price of $0.505 per share on 10 July 2019, with no change on the previous trading price.

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