Tech Sector Outperformers - APT, NEA

  • Nov 18, 2019 AEDT
  • Team Kalkine
Tech Sector Outperformers - APT, NEA

S&P/ASX 200 Information Technology sector from 2 January 2019 till 18 November 2019 grew by 36.717% and outperformed its benchmark index S&P/ASX 200, which during the same time frame grew by ~21.75%. By the end of the trading session on 18 November 2019, S&P/ASX 200 Information Technology index declined by 1.3% to 1,445.1 while the benchmark index S&P/ASX 200 fell 0.6% to 6,753.4.

In this article, we are discussing two ASX listed tech players, Afterpay and Nearmap, which have given a YTD return of 174.25% and 88.24%, as on 18 November 2019, respectively.

Afterpay Touch Group Limited (ASX: APT), a technology-driven payment company, is known for its buy now pay later (BNPL) services. The BNPL industry is relatively new in Australia, with the customer base (using the BNPL products) increased from 400k to ~2 million during 2015-2018.

According to a report released in November 2018 by the Australian Securities and Investments Commission, 70% of the users used this arrangement for the first time in the last one year. Out of these users, 60% are in the age group of 18 to 34 years, with more female base than the male base. APT came into existence in June 2017 when Afterpay and Touchcorp joined forces to form Afterpay Touch. The company now exists in two important areas, i.e. Pay Later, or Afterpay, which is a retail consumer brand and is in its high growth stage and expansion. The other key area is Pay Now or Touch, which is a mix of retail, mobility and health services.

Another IT sector player is Nearmap Ltd (ASX: NEA), known for its geospatial map technology offered to customers from business, enterprise and government segments. Nearmap was founded in 2007, and it has evolved from a small online start-up to a next-generation digital content leader and ASX 200 technology company. It provides immediate entry to high-resolution aerial imagery, city-scale 3D datasets along with integrated geospatial tools which help its customers to make informed decisions, carry out smooth operations, and make considerable cost savings.

Let us zoom our lens into the recent developments in these two tech players.

Afterpay Touch Group Limited (ASX: APT)

On 13 November 2019, Afterpay Touch Group Limited (ASX: APT) released its business update for four months ended 31 October 2019.

  • Underlying sales surged by 110% to $2.7 billion as compared to the four-month period ended 31 October 2018, while it grew by 23% as compared to the four-month period ended 30 June 2019.
  • Active customer base of the company went up by 137% to 6.1 million in the same time frame of the previous financial year, with active merchant base up 96% to 39,450.
  • On an average, the company added more than 15k new customers each day in October 2019. Thus, the month became the biggest client acquisition month on record. In July 2019, APT onboarded ~ 12.5k clients each day.
  • The customers, who joined Afterpay during FY2015-2017, are on an average purchasing ~ 22x per year. A similar upward movement was seen in newer cohorts, with the FY2018 and FY2019 cohorts buying, on average, fourteen times and seven times each year, respectively.
  • The number of merchants active on APT’s platform is 40k, which got doubled as compared to the prior corresponding period (pcp).
  • There were several major brands that either recently integrated or are under progress to onboard. Few amongst them were players like Ulta (US), eBay (AU), and Marks & Spencer (UK).
  • YTD Group merchant unaudited revenue margin, Group Gross Loss, Net Transaction Loss, and Net Transaction Margin are consistent with FY2019 levels.

The company entered into a strategic arrangement with Mastercard in Australia as well as New Zealand, which would assist APT in its growth over mid-term. Moreover, APT boosted a majority independent board with the recruitment of Mr Gary Briggs, who would take up the position from 1 January 2020.

By the closure of the market on 18 November 2019, the stock of Afterpay closed at $32.210, down 2.127% from its last closing price.

Nearmap Ltd (ASX: NEA)

On 14 November 2019, Nearmap Ltd (ASX: NEA) released details related to its Annual General Meeting (AGM).

Chairman Peter James threw light on FY2019 and informed the shareholders about the development during the period.

  • Expanded the product suite which comprised of the commercial availability of 3D in MapBrowser;
  • Made progress in the AI technology;
  • Made further investment in developing the next-generation camera system, enabling a higher, faster and more effective capture program;
  • In North America, NEA delivered 76% growth in annualised contract value. Now, the North American business comprises of more than one-third of NEA’s total portfolio;
  • Australia and New Zealand business also performed strongly in FY2019. The annualised contract value increased by slightly over $9 million, which expanded the portfolio by 19% on pcp.

CEO and Managing Director of Nearmap, Dr Rob Newman highlighted that the company is positioned for a global market opportunity based on its global geospatial vision, powerful subscription model, attractive unit economics, compelling customer utility and technology evolution.

He highlighted that in FY2019, NEA executed on strategic objectives.

  • Delivered on improvements in technology and products. It included the availability of 3D in MapBrowser subscription, the beta release of AI content via massive Nearmap data set along with next-gen HyperCamera2.
  • In Australia and New Zealand markets, the company commercialised a new product, deepened customer experience and established New Zealand operations. In North America, NEA boosted enterprise sales focus, expanded capability in SME long tail and opened a new sales office in New York.
  • Increased national and international partnerships followed by geographic expansion.

FY2020 Update:

Strong momentum expected in FY2020 with continued growth in ACV portfolio, accelerating growth opportunities in North America, strengthening leadership in Australia and New Zealand, deeper penetration of industry verticals as well as the availability of AI features on MapBrowser.

FY2020 focus areas:

  • Investment to maintain and enhance leadership in the location intelligent market.
  • Investment in technology and product to continue the roll out of differentiated content.
  • Manage a growing customer portfolio in an evolving industry environment.

On 18 November 2019, the stock of Nearmap settled at $2.845, down 1.215% from its previous close.


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