One Technology Company with Accelerating Growth Potential

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One Technology Company with Accelerating Growth Potential

 One Technology Company with Accelerating Growth Potential
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As the market participants know, the outbreak of the COVID-19 impacted several industries as well as companies. The performance of several companies was impacted due to the impact of COVID-19 pandemic. However, now there are some sectors which could deliver decent performance. This company belongs to the technology sector and it has recently reported decent results for H1 FY 2022 in the challenging environment. The stock price of this company has encountered a rise of ~8.1% in the time span of just 1 week.  

Smartpay Holdings Ltd

Summary

  • With net debt of ($5.5 million) in place at the end of September 2021, the company holds a robust balance sheet to assist its execution plan and sustained growth for the rest of FY22.
  • SPY continues to witness positive results from its investment in marketing and sales areas in Australia resulting in continuing acceleration in lead generation along with new terminal sales during H1FY22.
  • The quality of its business in New Zealand remains resilient during the most recent nationwide COVID lockdowns and stays a strategic asset in the New Zealand market. It also delivers operational leverage and scale for its Australian business.

SPY Details

Smartpay Holdings Ltd (NZX: SPY)is a leading provider of full-service EFTPOS across Australia and New Zealand markets. It provides services to more than 30,000 merchants with around 37,000 EFTPOS terminals. In NZ, the company happens to be the leading direct connector of EFTPOS terminals to Paymark, which is the central electronic payment processing platform. 

H1FY22 Result Performance (For the Six-Months Ended 30 September 2021)

  • The company’s total revenue increased to $21.0 million in H1FY22, up 45% from H1FY21 mainly driven by strong growth in the Australian acquiring transactional revenues.
  • Total Transaction Value (TTV) increased by 103% to $1.1 billion over the $545 million in the prior year.
  • EBITDA increased by 10% YoY, which indicates the effect of the lockdowns in New South Wales and Victoria during the reporting period and the emphasis on sustaining its investment in growth and customer acquisition cadence
  • It reported a profit of $0.4 Mn and it contains a non-cash gain ($0.9 million) due to the conversion of the remaining convertible notes during the period.

Key Financial Data

Source: Company Reports, Analysis by Kalkine Group

Do Read: Smartpay (NZX:SPY) What did it reveal in the trading update?

Trading Update

SPY, in its trading update for the December quarter, mentioned that Australian Acquiring revenues grew strongly during the third quarter ended 31 December 2021 of FY22. Gross Margin per transacting terminal improved during the quarter as it realised additional scale benefit from improved transactional processing costs as well as improved average revenue per customer. Further, the contribution from New Zealand revenue reported monthly increase owing to the impact of easing of trading restrictions into the Christmas period.

Issue of Share Performance Rights

The company, on 21 December 2021, mentioned that the board has authorised the issue of Share Performance Rights to some of the company’s key management team. The company is of the view that the particular issue of share performance rights will support the reward, retention and motivation of the key management team to deliver shareholder value.

Also Read: How are 10 NZX technology stocks faring amid the pandemic?

Stock Recommendation

The company has delivered robust result in Q3FY22 across entire reported metrics driven by the return to near normal trading conditions during the period in Australia and New Zealand along with the continuing growth in Australian acquiring customers.

Although the outbreak of Omicron in Australia has triggered certain disruption for its customers initially in 2022, the company is forecasting another positive quarter in Q4FY22 and a strong finish to FY22.

Driven by the continuing acceleration in its Australian customer acquisition along with a robust ‘bounce back’ effect witnessed in its Australian transacting terminal numbers and acquiring revenues in October, the company is eyeing at better operating leverage as well as a solid performance in H2FY22.

The company is optimistic about the execution against the strategic objectives as well as overall business performance in H1 FY 2022 amidst the challenging trading environment in both Australia as well as New Zealand.

The stock of the company ended the session at NZ$0.800 per share, which reflects a decline of 2.44% on 21st January 2022.

Please Read: Which are the 11 popular software stocks on NZX?

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