Lens through Buy Now Pay Later Space Players – SPT, APT, FXL

Around 30% of Australian grownups or 5.8 million are estimated as the users of BNPL services for primarily making minor retail payments and purchases, according to the Buy Now Pay Later report 2019 by Mozo.

At end-December 2019, the Australian Financial Industry Association (AFIA) had updated the market regarding commencement of a six-week public consultation into BNPL Code (Code of Practice for BNPL market) from mid-January 2020 and its implementation in mid-2020 or 1^st July 2020.

• BNPL Code of Practice would help improve protection for its customers, while maintaining customer preference to make payments and purchases in a manner that fits their requirements.
• The Code would ensure customers have strong protection assisting them with better knowing the product and their rights.

Key parts of the code cover the providers’ obligations to:

• Evaluate customers to make sure the product is best fit for them, as well as offering additional controls for customers that are identified as potentially more vulnerable via this process.
• Complaints are resolved in a quick and fair manner with customer access to internal complaints handling, and if they cannot be resolved, they can be taken to the Australian Financial Complaints Authority (AFCA.
• Deliver hardship assistance to customers facing financial problems.
• Ensure vendors and merchants act in line within BNPL provider guideline.

Let’s discuss three BNPL stocks listed on ASX.

Splitit Payments Ltd (ASX: SPT)

SPT is a provider of credit card-based instalment solutions (cross-border) to businesses and merchants.

Splitit Partners with Visa

Splitit and Visa are joining hands as part of the global instalment payment ecosystem, enabling the Company to offer Visa Instalment Solutions to its merchant partners, thereby accelerating the instalment payment distribution. Both the companies will also explore further opportunities concerning new product development.

The Company will leverage the Visa Developer Platform to contribute in continuing improvement of the instalment payments landscape worldwide. It will also integrate with Visa Instalment Solutions, which aids merchants and issuers (participants) with providing more power to the cardholders of Visa concerning payments towards purchases.

Splitit Reports Stellar Growth with FY19 Record Results

The Company has reported its results for the 12 months ended 31^st December 2019. Key highlights are-

• Record revenue of US$1.65 million, up 108% on FY18, on the back of growth in merchant fees.
• Merchant Sales Volume (MSV) noted at US$88 million, annualised to US$110 million, representing a 52% increase on FY18.
• North America was the fastest growing region with MSV registering year on year growth of 78%.

Additionally, Splitit Payments has registered with AUSTRAC to provide factoring services to merchants and grow its funded merchant model in Australia.

Stock Performance

The stock of SPT was trading at $0.500 per share on 05^th March 2020 (AEDT 01:04), up by 2.041% from its previous closing price. The Company has a market capitalisation of $152.65 million and its total outstanding shares stood at 311.53 million, with 52-week low and high noted at $0.350 and $2.000, respectively. The stock has given a total return of -35.95% and -5.77% in the time period of 3 months and 6 months, respectively.

Afterpay Limited (ASX:APT)

Technology-driven payment solutions provider, APT has two segments, namely, Afterpay and Pay Now, catering to consumers and businesses.

Afterpay Records Triple Digit Growth in H1 Underlying Sales

For the six months ended 31^st December 2019, the Company reported underling sales of $4.8 billion, up 109% from the same period a year ago, with a run rate of more than $11.0 billion per annum. Total Group income stood at $220.3 million, representing an increase of 96% from H1FY19. Merchant margins remained stable at 3.8%, reflecting the appeal of shared value business model to merchants.

Key highlights:

• Global active merchant base on the Afterpay platform went up by 86%, on the back of strong growth in all markets.
• At the global level, record number of active customers noted at 7.3 million, averaging more than 16,800 new customers per day in the first half of FY20 and growing to surpass 22,900 per day in the months of November and December 2019.
• The Company continued expansion momentum on a global level, with accelerated growth in the US and UK.
• Underlying sales in the United States were reported more than five times than the previous corresponding period.

Stock Performance

The stock of APT was trading at $34.370 per share on 05^th March 2020 (AEDT 01:05 PM), up by 3.555% from its previous closing price. The Company has a market capitalisation of $8.78 billion and its total outstanding shares stood at 264.6 million, with 52-week low and high noted at $18.620 and $41.140, respectively. The stock has given a total return of 14.13% and 4.34% in the time period of 3 months and 6 months, respectively.

FlexiGroup Limited (ASX: FXL)

Via a network of retail and business partners, FXL offers numerous finance solutions to consumers and business, including credit cards, Buy Now Pay Later (BNPL) products, and consumer and business leasing.

Strong Double Digit Volume Growth for FXL in 1HFY20

In 1HFY20 ended 31^st December 2019, the Company grew its active customer base to 1.87 million, up 12% on pcp. It also added to its valued partnerships, with merchant base growing by 15% year on year to 69,000 in countries including Australia, New Zealand and Ireland. Retailer and customer base growth is expected to boost future volume growth.

Cost to income ratio was noted at 54% in the first half of FY20, an increase from 1HFY19, post investments directed towards marketing technology, digital advertising and brand repositioning.

Transaction Volume to Grow 10-15% in FY20

The Company expects transaction volume to grow in a range of 10% to 15% for FY20. Moreover, it anticipates that this growth would be driven by new product launches, new partnerships and new customer segments as demonstrated by volume in the second quarter, which went up by 16% year on year. This would be partially offset by the softer retail trading environment.

The Company also anticipates to balance margin with growth and to maintain a double digit return on equity. It is boosting investment for future growth and a major part of the funds are planned for people, high performance digital marketing, brands, and streamlining of operations during FY20.

Stock Performance

The stock of FXL was trading at $1.610 per share on 05^th March 2020 (AEDT 01:14 PM), up by 2.548% from its previous closing price. The Company has a market capitalisation of $619.19 million and its total outstanding shares stood at 394.39 million, with 52-week low and high noted at $1.280 and $2.710, respectively. The stock has given a total return of -20.30% and -14.57% in the time period of 3 months and 6 months, respectively.

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