Tech is back, and so are ASX-listed BNPL players Z1P and APT

Summary

  • After a significant fall in the S&P/ASX 200 Information Technology index last month, there has been a resurgence in the index this month.
  • September’s Wall Street performance harmed the technology sector with several tech stocks struggling on the exchange.
  • Fintech industry was hit hard last month, but it is witnessing a revival in October.
  • While Zip Co Limited and Afterpay shares witnessed a ~33% and ~13% drop, respectively in September, they are up 20.15% and 8.20%, respectively this month.
  • Zip recently completed the acquisition of QuadPay while Afterpay acquired Pagantis through its subsidiary, Clearpay.

The technology sector was riding a strong wave after the massive sell-off in March. However, the momentum was lost last month with the tech sector amongst the worst hit due to the weak Wall Street performance. In the first week (31 August till 04 September 2020), the index dropped by nearly 8.36%. On 14 September 2020, the index hit its lowest level and stood at 1661.80. Many technology companies, including fintech players, witnessed a considerable drop in their respective share price last month.

October, though, has started on a positive note with the index bounced back in the first few days on the month. On 08 October 2020, the index settled at 1889.80, up 2.7% from the previous close, becoming the best performing sector index during the day.

The fintech industry has flourished during the pandemic, aided by an increase in demand for cashless transactions. According to a KPMG report, in the first half of 2020, investments in the Australian fintech sector accelerated and reached US$376.5 million, over 150% as compared to the previous corresponding period.

GOOD READ: BNPL Corner: Openpay Delivers Substantial August Numbers, Zip Co Director Quits

Despite the rising pandemic concerns, Australia has acted as a strong financial hub on a global scale. Mr Dan Teper, KPMG Australia Partner and Head of Fintech stated that Australian fintech players are scaling up aggressively, which would result in boosted investments in the area. In this sector, the Government is also playing a substantial role in supporting industry growth in the country.

Given the spurt in digital trends, experts believe the pandemic would lead to increased fintech investment in the second half of the current year.

Image Source: Kalkine

On that note, let us look at a couple of Australian fintech companies and look at their recent developments and performance.

Zip Co Limited (ASX:Z1P)

Zip is engaged in digital retail finance and payments business has witnessed a massive growth in its share price by 237.50% in the last six months. However, on 31 August 2020, Z1P shares which stood at A$9.160 reached A$6.17 on 30 September 2020, representing a fall of ~32.64%. However, the share price bounced back on 01 October 2020 and reached A$7.93 by the end of the day’s trade on 08 October 2020. In the last five days, shares have delivered a decent return of 10.45%. Z1P has a market cap of 3.76 billion and 516.18 million outstanding shares.

On 01 September 2020, Zip Co had announced that it completed the acquisition of QuadPay. The Company also completed the issuance of A$100 million in convertible notes and up to a further A$100 million in warrants to CVI Investments Inc to drive global growth. CVI Investments Inc is an affiliate of US-based Susquehanna Investment Group.

As per the terms of the QuadPay acquisition, Z1P issued ~119 million fully paid ordinary shares to QuadPay shareholders. The Company also granted 10.48 million options to subscribe for new fully paid ordinary shares in Z1P Co to present employees plus other option holders in QuadPay.

The acquisition of QuadPay would provide more than US$70 million in monthly transaction volume along with more than 2 million customers to Zip.

Quarterly Rebalance:

In the recent quarterly balance, Z1P was included in the S&P/ASX 200 index.

Afterpay Limited (ASX:APT)

A leading BNPL company, Afterpay Limited has noted a massive growth of ~303% in its share price in the last six months. During the September 2020 month, the shares which stood at A$91.44 tumbled and reached A$79.99 on 30 September 2020. This represents a drop of 12.88%. However, with some improvement in the market, the shares bounced back, and by market closure on 08 October 2020 settled at A$87.05. APT has a market cap of A$24.12 billion and 284.29 million outstanding shares.

Afterpay, during FY2020, delivered solid results and made efforts to extend its presence in the US and UK.

  • Afterpay Underlying Sales were up 112% from A$5.2 billion in FY2019 to A$11.1 billion in FY2020.
  • The number of active customers and active merchants were up by 116% and 72%, respectively as compared to the previous corresponding period.
  • Afterpay’s Gross Loss as % of Underlying Sales improved by 24%.
  • EBITDA grew by 73% to A$44.4 million.

Acquisition of Pagantis:

On 24 August 2020, the Company’s subsidiary Clearpay (Europe) Limited entered a share price agreement to acquire the outstanding shares in Pagantis SAU and PMT Technology SLU (together known as Pagantis).

The Company is expanding in new markets to take advantage of strong consumer and merchant demand plus increase its global footprint. APT considers the EU as its next step for international expansion as the region has a substantial number of millennials, considerable usage of debit cards, and broad fashion and beauty retail markets. APT also recognised that the addressable e-commerce market in the EU is ~€300 billion.

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