BNPL Stocks Flying High on ASX; OPY zooms up by ~41%, Z1P surges up by ~20%

Summary

• BNPL products and services have been providing value to both consumers and retailers during the current COVID-19 crisis through affordable, simple, and tech-based solutions.
• AFIA (Australian Finance Industry Association Limited) to launch world’s first BNPL Code of Practice on 1 January 2021.
• Openpay gets UK funding of £ 25 mn from UK financier Global Growth Capital.
• May 2020 was noted as the strongest month in Openpay's history.
• Zip acquires BNPL player QuadPay (New York based) and expands into the US retail market.

The great virus crisis (GVC) continues to impact the global economy. This period also reflected how BNPL products and services have been offering value to consumers and businesses by giving them a low cost, technology-based and straightforward solution to get access to goods and services to fulfill their requirements.

The Australian Finance Industry Association (AFIA), has welcomed shareholders' suggestions during the public consultation for the new BNPL Code of Practice.

Diane Tate, the AFIA CEO, said as part of the consultation process, it was significant to receive the feedback from stakeholders as the draft code was prepared before the coronavirus crisis and now the aim is to launch the code on 1 January 2021.

Let's discuss the 2 ASX listed BNPL stocks in detail:

Openpay gains UK funding facility of £ 25 million

Openpay Group Ltd (ASX:OPY) is a key player in the fast-growing international market for BNPL (Buy now pay later) payment solutions. The Company’s alliance with retailers offer BNPL repayment plans to customers online, in-app, and in-store. It enables consumers to buy anything while spreading repayments across time with interests.

OPY has recently obtained a UK funding debt facility of £ 25 million from prominent UK financier GGC (Global Growth Capital). Here are the main highlights:

• Out of this amount, £ 10 million will be immediately available to OPY to support its fast-growing UK business and remaining £ 15 million upon GGC's satisfaction of several conditions.
• Significant milestone accomplished with the launch of JD Sports in the UK.
• Initial customer uptake for UK business is above expectations.
• Robust growth in Openpay's leading indicators in May 2020 with Active Plans up to 739k (+220 per cent versus pcp), Active Customers up to 293k (+131 per cent versus pcp), and Active Merchants up to 2,096 (+50 per cent versus pcp).
• Total Transaction Value (TTV) grew to AUD 170m in May FY20 year to date (+95 per cent versus pcp).
• Record growth in Active Plans, Active Customers and TTV in May through Merchant marketing initiatives across all industry verticals during 'OpenMay'.

This new facility (debt) has a 21-month term, and the Company also have an existing AUD 75 million debt facilities (of which AUD 45 million remains undrawn) and has a maximum advance rate of 80 per cent.

Openpay CEO, Michael Eidel said that the Company was thrilled to secure this vital funding capacity during the uncertain market environment. Openpay UK has become an essential contributor to the Company's Total Transaction Value. GGC adds more strength to the Company's robust balance sheet. It offers ample funding to support the company's current growth objectives in the UK. The funding capacity is the testament to both- GGC's great entrepreneurial and partnership approach and the Company's differentiated BNPL offering.

GGC Partner, Harsh Patel, said that Global Growth Capital was known to support growth companies like Openpay. Its UK business is growing tremendously, and GGC is pleased to support the firm for its next phase of growth financially.

Subsequent to the robust Q3 FY20 results released in April this year, Openpay continued to see further solid growth across all leading indicators through April and May months. Also, May 2020 has been the strongest month in the Company’s history.

On 3 June 2020, OPY was trading at AUD 2.81, with a market cap of AUD 186.66mn, zooming up by 41.206 per cent (at AEST 1:37 PM).

Zip acquires NY based BNPL player QuadPay, raises AUD 200m

Image source: Company’s announcement

Zip Co Limited (ASX:Z1P) is a leader in the digital retail finance and payments industry. It offers services to education, retail, travel, and health industries, and has three brands- Zip Money, Zip Pay, and Pocketbook brands.

Z1P inked a deal to obtain the remaining shares of New York based BNPL provider QuadPay Inc. The stockholders of QuadPay will be authorised to get up to 119 mn fully paid ordinary shares of Zip that is equivalent to 23.3 per cent of the issued share capital of Zip at completion.

This acquisition by Z1P implies a value (enterprise) of ~USD 269 mn (or AUD 403 million) for QuadPay and is accretive for Z1P based on a TTV and topline.

The benefits that Zip will get through this acquisition are as following:

• Z1P will get access to the largest retail market (USD 5+ trillion and >15x size of Australia).
• The combined group would operate throughout the globe in 5 nations (AU, NZ, US, UK and SA) with collective annualised total transaction value of AUD 3.0 bn, annualised revenue of AUD 250 mn, 3.5 mn customers and 26.2k merchants.
• Increased scale and growth potential, as QuadPay has grown significantly from its inception in 2017. At the end of March 2020, it had more than 1.5m customers and 3.5k merchants that includes of brands like Deckers (UGG) and Fashion Nova and annualised revenues of AUD 70m in Q1' CY20 and annualised TTV of AUD 900m in Q1' CY20.

On 3 June 2020, ZIP surged up by 20.577 per cent (at AEST 1:36 PM), at a price of AUD 6.215, with a market cap of AUD 2.03bn.