Leftfield fintech play - Afterpay Touch

Investment Analysis Clubs Saul’s Investing Discussions
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For anyone interested in Paypal, Square, MercadoLibre, PagoSeguro, Visa, Mastercard etc and either wants to keep an eye on prospective fintech threats or looking for a fintech play disrupters to invest in, there’s one that has been mentioned before here - Afterpay Touch.

This won’t be for everyone but for those that want diversity and have international investing accounts and mindsets, this one is from ANZ and listed in Australia.

It has been covered by TMF in Australia and fool members are on board with this.

It started in Australia/New Zealand and took the market by storm - still growing in triple digits and now profitable in the core market.

They entered in the US last year.

They are entering the UK (the 3rd largest eCommerce market) and Europe (where they have now sold off the rights to)

Their business model is a fintech riff on the buy now pay later solution with a unique value proposition to buyers and merchants.
https://www.afterpaytouch.com/images/AGM-Presentation-Slides…

They just pre-released their H1 results today which are extraordinary and the share price is up 10% on the Australian market.
https://www.afterpaytouch.com/images/180119-ASX-Business-Tra…

Strong underlying growth and performance continued in 1H FY19 (unaudited):
? Underlying sales in 1H FY19 was over $2.2 billion, up from $918 million in 1H FY18 (up 240%),
with December 2018 the largest ever month on record for Afterpay.
? The US business processed $260 million of underlying sales in 1H FY19, with annualised underlying sales now in excess of $500 million based on 1H performance.
? Over 23,000 merchants have transacted with Afterpay globally in the last 12 months1.
? Over 3.1 million active customers in the last 12 months, growing at an average of approximately
7,500 new customers per day over Q2 FY192.

They grew 100% in their established Australia & NZ market to $2bn.
In the first 6 months of trading in the US they achieved $260m in underlying sales - something that took 28 months to achieve in Australia.

They can be viewed as a legitimate hyper growth fintech investment play, a potential M&A target for Paypal/Square/etc, or as a disrupting threat.

Ant
(I hold a very small holding ~0.5%)

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This company (APT on the Sydney exchange) is one of my largest positions. It is also one of the largest positions in Joe Magyer’s small cap Australian fund – Joe is a MF analyst with an exemplary long term record. It is certainly very risky! Possibly the biggest risk is regulation – will its model be deemed subject to financial company/lending regulations in its various jurisdictions? This is an active issue in Australia.

Here is a link to a recent newsletter from Joe Magyer containing a discussion of APT:

https://www.lakehousecapital.com.au/wp-content/uploads/2018/…

If the link does not work, you can Google Lakehouse Capital Small Cap Fund and look at the November newsletter. Other letters are also valuable reading.

One more thought – Joe also has a large position in Altium (ALU on Sydney exchange), as do I – a SaaS company that is a great play on the IoT.

Rich

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Is this AFTPF OTC market?

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From the link:

We make more money when customers buy what they can afford, pay on time and stick to their simple instalment plan

AFTERPAY IS FUNDAMENTALLY DIFFERENT TO TRADITIONAL CREDIT PRODUCTS [emphasis added]

Ant, fintech is great provided there is no credit risk. Long VISA.

Denny Schlesinger

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Guys - just a minor update for those that are interested in following Afterpay as I know it isn’t easy to keep track of foreign holdings the other side of the world…

First of all - hat tip to Sean for bringing this stock to the board originally and very insightful contributions from William in sharing resources back on this thread and David for his coverage.

https://discussion.fool.com/afterpay-touch-34005122.aspx?sort=wh…

Recently in tracking progress on the stock I came across this great resource for covering Australian stocks in general and Afterpay specifically.

https://hotcopper.com.au/asx/apt/

It has a board to a stock and then many threads linked to particular themes/topics.

3 recent broker upgrades were covered here including:
Goldman Sachs
https://hotcopper.com.au/threads/goldman-sachs-target-27-10-…
“We raise our earnings estimates and target price for APT following a review of the latest indicators in the US market. Early signs of success in the US remain strong: APT has experienced a record month of US app downloads, website visitations numbers are growing and it continues to add more retailers. APT will likely need to invest in infrastructure (staff, marketing, customer service, etc.) to support this strong growth and, as a result, our earnings revisions are more muted than our top line upgrades. We introduce a Lifetime Value estimate of APT’s user base: our current estimates imply a per-share value of ~A$23.10 by FY21E. However, should APT achieve a 25% penetration rate of the millennial user cohort in the US and UK, this could generate a value of ~A$35.30. We therefore expect APT’s share price to correlate strongly with user addition numbers. We assume 9.1k customers globally are being added on a daily basis in 2H19 and expect this to rise to 9.9k in FY20E and 10.4k in FY21E. If APT demonstrates it is accumulating customers faster than this, we expect the market to react positively (and vice versa). Our 12-month target price (A$27.10) implies 15% upside. We make no change to our Buy recommendation (on CL).”

Bell Potter and Hot Copper also both issued upgrades
https://hotcopper.com.au/threads/coppo’s-new-target-30.46944…

Also there’s a whole thread tracking forward looking performance metrics of the stock.
https://hotcopper.com.au/threads/alternative-metrics.3841385…

I’ve now raised this holding to 2% which at a US$4bn I feel is a reasonable opportunity to grow considerably from here.

Ant

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