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The development and growth of an economy can be gauged by various macroeconomic factors such as the gross domestic product of the county, interest rates, exchange rates, and inflation, among others. In addition to these microeconomic factors, growth in individual sectors such as finance, energy, utilities, and aviation also affects economic growth.
While historically, the financial sector performance in Australia has been steady and robust, it has been affected by the global slowdown in the past couple of months. Also, the sector is grappling with multiple challenges, including the recent scandals, issues with the private health insurers, and the threat of cyber-attacks, to name a few. The sector, however, remains one of the biggest in Australia, contributing significantly to the GDP and providing employment.
At the close of the trading session on 28 February 2020, S&P/ASX 200 Financials (Sector) witnessed a fall of 190 points and closed at 5,904.32 as compared to the previous close of 6,094.35.
Let us look at two financial companies and their recent financial performances:
MyState Limited (ASX:MYS)
MyState Limited is a diversified financial services company engaged in providing various services such as banking, trustee and fund management services. The Company operates through its retail brands TPT Wealth and MyState Bank.
Interim Dividend to be Partially Underwritten
- MyState, via a release dated 28 February 2020, announced that Dividend Reinvestment Plan (DRP) for the FY2020 interim dividend of 14.25 cents per share would be underwritten partly.
- Bell Potter Securities Limited was appointed by the Company for the role of lead manager as well as an underwriter of the DRP. The lead manager and underwriter of DRP would underwrite the shortfall of the DRP up to a maximum amount of $7 million. The Company anticipates raising funds in the range $9 million to $10 million in total based on historical DRP participation rates.
- The issue price of DRP will carry a discount of 2.5% to VWAP (volume-weighted average price) of MYS’s shares calculated over the ten trading days between 09 March 2020 and 20 March 2020 (inclusive). The Company would be using the raised funds for underpinning the growth of the balance sheet.
Improved Net Interest Income
The Company recently reported impressive half-year FY20 results with significant improvements throughout the business for the six months ended 31 December 2019 (1H FY20):
- MYS delivered a net profit after tax amounting to $15.1 million with a rise of 5.4% as compared to the previous year. The Company’s EPS stood at 16.6 cents per share, which increased by 4.4%.
- The net interest income for the period witnessed a rise of 9.1% and amounted to $48.2 million. The growth has been aided by the balance sheet growth, disciplined deposit and lending margin management, as well as reduced wholesale funding costs over the period.
- During the period, the Company had built a highly competitive position with the help of its strategy of digitisation, delivered superior service, and supported robust customer growth.
- The Company has driven transformation via implementing digital systems and structuring its business for serving customers more effectively.
- The Company reported revenue of $8.2 million from TPT Wealth, which showcased a rise of 5.1% from $7.8 million of 1H FY19.
Stock Performance
The stock of MYS was trading at $5.890 per share on 02 March 2020 (at 03:02 PM AEDT), indicating an increase of 0.684% against its previous closing price. The Company has a market capitalisation of $535.13 million. The total outstanding shares of the Company stood at 91.48 million, and its 52-week low and high is $4.020 and $6.170, respectively. MYS has generated a total return of 24.20% and 22.90% in the last three months and last six months, respectively.
Openpay Group Ltd (ASX:OPY)
Openpay Group Ltd is a financial sector company, which provides payment technology and offers Buy Now, Pay Later products. The Company offers its services across Australia, the UK, and New Zealand.
Strong Momentum in BNPL Business
Openpay Group Ltd recently released its operational and financial performance for the first half of the financial year 2020 and outlined the following:
- The Company managed to finish the first half of FY20 with strong momentum in its buy now, pay later (BNPL) business throughout all critical operating metrics, along with continuing growth into 2H FY20.
- At the end of the period, the Company reported over 462,000 active plans in place. Moreover, the active plans within each vertical witnessed a rise of over 100% as compared to pcp. This growth was underpinned by the introduction of key retailers, expansion of OPY into the UK, as well as a rise in concurrent plans and repeat usage.
- The Company finished the half-year with a record active customer growth throughout all specialist merchant verticals. The customers at the end of half-year FY20 reached 206,434, reflecting a rise of 99% against pcp.
- As of 31 December 2019, the cash balance of the Company stood at $52.6 million. Openpay possessed Australian debt facilities worth approximately $75 million. The composition included Australian receivables facilities along with two providers worth $65 million, as well as a working capital facility worth $10 million. The loan to value ratio of the Australian receivables book stood at 66%, which helped the Company with a substantial headroom with a goal of 80% and an 85% limit under its first facility.
- The Company has made decent progress towards its goal of becoming a leading provider of payment services. Going forward, OPY would continue to leverage its substantial investment in the growth of the business.
- OPY has strong interest from numerous potential investors. Moreover, it is involved in advanced discussions with several financiers to help support and fund UK growth.
- During the six months of UK operations, the active plans of the Company witnessed growth from 2,950 to more than 43,000. The Active Customers of UK segment increased to more than 33,000, from 2,750, along with positive trends of repeat use shown.
- Total Transaction Value (TTV) for the period stood at $84.4 million with a rise of 95% as compared to pcp. The Company reported revenue amounting to $8.3 million for 1H FY20, with a rise of 73% vs pcp.
Stock Performance
The stock of OPY was trading at $1.030 per share on 02 March 2020 (at 03:02 PM AEDT), in line with the previous closing price. The Company has a market capitalisation of $96.61 million. The total outstanding shares of the Company stood at 93.8 million, and its 52-week low and high is $1.000 and $1.650, respectively. OPY has generated a return of -16.94% on a year-to-date (YTD) basis.
