2 Quality Stocks In Fintech Space- Z1P And EML

2 Quality Stocks In Fintech Space- Z1P And EML

Below mentioned stocks belong to Fintech Industry, and in the recent past, these stock have reported significant operational performance. Let’s take a closer look at these stocks-

Zip Co Limited (ASX: Z1P)            

Zip Co Limited (ASX: Z1P) is a leading player in the digital retail finance and payments industry which is focused on offering transparent, responsible and fairly priced consumer products. Recently, the company announced its quarterly performance for the period ending 31 December 2018 (Q2 FY 2019) in which the company reported revenue of $19.2 million which is 28% higher than its Q1 FY 2019.

As per the company’s Managing Director and CEO Larry Diamond, during the December quarter, the company saw record results across all key metrics which includes customer engagement, transactions, in-store volumes, revenue and bad debts.

The company’s receivables increased by 36% to $489.0 million in Q2 FY19 as compared to the receivables of Q1 FY 2019. Further, the company reported Record transaction volume of $304.4m in Q2 FY19 which is 60% than Q1 FY 2019 with Transaction volume for November and December month both exceeding $100 million.

The Quarterly Cash EBITDA (cash earnings before tax depreciation and amortization) increased to 1.7% of average receivables, up from 0.3% in Q1. The yield on the receivables portfolio increased to 17.8% in Q2, compared to 17.5% in Q1. Revenue Yield incorporates portfolio income and excludes other income. Management has a medium-term target of 20%. The Cash Operating Costs as a percentage of quarterly average receivables reduced to 7.8% in Q2 FY19 from 8.4% in Q1 FY19.

Zip Co reported a positive operating margin of $4.6m in Q2 which was $2.5 million higher than Q1. The Net cash from operating activities in the December quarter was comprised of Receipts from customers of $19.1m, Cash payments for Operating Costs of $9.8 million and Interest and other finance costs of $4.7 million.  Net bad debt write-offs for the quarter totaled to $2.3 million in Q2 FY 2019 which is slightly higher than the $2.2m in Q1 FY 2019.

As per the company’s announcement, between September and December month, the monthly transacting users (MTU) increased by 65% and total customers increased by 20%. During the December quarter, the company delivered its biggest promotional campaigns to date, with Zip Frenzy, Black Friday, Cyber Monday and Boxing Day all recording more than twice the volumes achieved in the previous year.

In the past six months, the share price of the company increased by 34.25 percent as on 5 February 2019. Z1P’s shares traded at $1.215 with a market capitalization of circa $382.77 million as on 6 February 2019.

EML Payments Limited (ASX: EML)

EML Payments Limited (ASX: EML) provides transparent as well as flexible payment processes services to its customers, and its portfolio offers innovative financial technology that provides solutions for payouts, incentives and rewards.

Recently on 4 February 2019, the company announced the launch of its branded reloadable winnings card program with a leading Gaming company of Sweden, Betsson. The reloadable winnings card program offers cardholders the ability to transfer their winnings from their gaming account onto the card instantly, and it is anticipated that this is the first of its kind in Sweden and it will help Betsson with both customer retention and acquiring new customers.

Currently, the company is not able to accurately estimate future Gross Debit Volume (GDV) that will be derived from this program and it is expecting that the GDV to revenue conversion rate from this program will be materially in line with the company’s average for the General-Purpose Reloadable segment.

In January 2019, the company also launched a branded payments card program with an Australian founded corporate bookmaker, PointsBet USA Inc. The program is launched in the state of New Jersey in the United States of America, and this program will allow PointsBet players to remit funds into their gaming account and fast access to their winnings.

Currently, the company is unable to accurately estimate future Gross Debit Volume (‘GDV’) which will be derived from this program and it is expecting that the GDV to revenue conversion rate from this program will be materially in line with the company’s average for the General-Purpose Reloadable segment with the first material earnings contributions delivered in the FY 2020.

In the past six months, the share price of the company decreased by 13.25% as on 5 February 2019 and traded at a PE multiple of 160.0x. EML’s shares last traded at $1.445 (+0.347% intraday) with a market capitalization of circa $360.29 million as on 6 January 2019.


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