APT - Afterpay Limited

[luutzu]

IMO there is a very high probability APT will report some crackers results tomorrow, with some record growth numbers in US and overall transactions.

Let's see who is right luutzu

I'm sure its "underlying sales", the take up, the membership, the retail partners... those numbers will be very, very high.

Seeing how the market seem to judge APT's performance through such metrics... share price might very well rocket up again.

I'm talking about its viability and the coming credit crunch.

 

[leyy]

Why do we think APT is reporting tomorrow? according to it's last announcement they will report on 26 February

 

[luutzu]

Why do we think APT is reporting tomorrow? according to it's last announcement they will report on 26 February

 

[bigdog]

Downloaded all the trades and the top 14 were not substantial trades (sorted highest to lowest)

There were no significant trades today!!
-- the biggest trade was 21,304 shares for $380,276.40

Total trades were 3,912,120 for 28017 transactions and average trade was 139 shares

Perhaps the robots were busy today!!!

 

[peter2]

Looks like a few reporting calendars have the wrong date for APT's next fin report.
After market close APT reaffirms Feb 26th as the date for release of H1 report.

"The Company notes that the Senate Committee’s report in respect of the Senate Inquiry into Credit
and Financial Services Targeted at Australians at Risk of Financial Hardship is due to be published this
Friday 22 February 2019."

 

[bigdog]

Peter2 you are right

Below is article included todays "The Age"
https://www.theage.com.au/national/...the-other-wild-west-20190220-p50z2i.html?btis

Sometimes a head's up doesn't pay
Hats off to the geniuses at Afterpay, the "buy now, pay later" outfit eagerly awaiting the outcome of a senate inquiry into its business model, due Friday.

Just after 11am Wednesday, the Nicholas Molnar-led company suffered a sharp sell-off in shares, dropping from $19.10 to $17.30 just 40 minutes later.

Much of that, double the number of trades on an average day, went through Citi and UBS.

Now it appears Afterpay dialled around analysts – the company is tracked by Goldman Sachs, Bell Potter, Morgans, Wilson and Evans & Partners – to remind them of the inquiry's report due to be handed down by Labor’s Jenny McAllister.

Not exactly a sign of confidence in Afterpay’s "economics advisor" Craig Emerson or its Liberal-aligned lobbyist David Gazard, who have led the effort in advising the company as it faces the prospect that the inquiry will recommend tough measures that could seriously harm its business.

 

[bigdog]

Opened at $17.45

6011 trades with average 235 shares

 

[bigdog]

Who leaked the report!!

I hold

Parliament is investigating whether MPs and their staff are in "contempt of the Senate" after shares in buy-now pay-later companies including Afterpay plunged following the internal circulation of a draft report.

The draft findings of an inquiry into the sector, which could recommend tougher credit regulations on the booming industry, were shared among six committee members at 7.30pm on Tuesday.

As many as 58 staff in senators' offices could also have accessed the report, which is due to be released on Friday.

The Age
https://www.theage.com.au/politics/...ers-senate-investigation-20190221-p50zbu.html

$1.3 million Afterpay share dive triggers Senate investigation
By Eryk Bagshaw and Colin Kruger
February 21, 2019 — 6.38pm

Parliament is investigating whether MPs and their staff are in "contempt of the Senate" after shares in buy-now pay-later companies including Afterpay plunged following the internal circulation of a draft report.

The draft findings of an inquiry into the sector, which could recommend tougher credit regulations on the booming industry, were shared among six committee members at 7.30pm on Tuesday.

As many as 58 staff in senators' offices could also have accessed the report, which is due to be released on Friday.

Shares in the providers fell an hour after the market opened on Wednesday, with Afterpay falling by 11 per cent between 11.16am and 11.37am.

Trades of more than 1000 shares were made with a value of more than $1.3 million. By the market's close, more than 3.9 million shares were traded, double the daily average.

Buy-now, pay-later companies have surged as an alternative to conventional credit products and are available at thousands of stores across Australia, including David Jones, Asos and Nike

Afterpay, which is expanding to the United States and United Kingdom, has a market capitalisation of $4 billion. Its share price has surged by 58 per cent since the start of this year.

The Australian Securities and Investments Commission said it started inquiries into the sharp share price drops of Afterpay and its rivals Zip and FlexiGroup on Wednesday night.

"There was no general announcements that proceeded this drop," ASIC commissioner Cathie Armour said.

The Senate secretariat is now expected to summon senators, staff emails and interview those close to the report to establish if there had been contempt. That process was still being determined on Thursday afternoon.

One committee member said they expected the Senate to get the investigation "finished ASAP" as regulators turn their attention to traders who may have scored out of the plunge. It was revealed on Wednesday that Afterpay, which is tracked by Goldman Sachs, Bell Potter and Morgans, dialled around analysts to remind them of the inquiry.

Committee chair Jane Hume and fellow Liberal member Amanda Stoker have ruled out any disclosure coming from their offices, as has Greens Senator Peter Whish-Wilson, who was substituted for Sarah Hanson-Young for the hearings of the Senate inquiry. Senator Hanson-Young ruled out any distribution of the market sensitive document from her or her staff.

Labor Senator Chris Ketter could not rule out an unauthorised disclosure coming from his office.

"It’s not clear what happened in this circumstance, but the Senate has well-established procedures for considering potential instances of unauthorised disclosure," Senator Ketter, the committee's deputy chair, said.

"Labor senators take the confidentiality of committee deliberations seriously."

Fellow Labor senators Kristina Keneally and Jenny McAllister have not responded to requests for comment.

Speaking at Zip's half-year results on Thursday, chief executive Larry Diamond was asked what the he thought the report recommendations would find.

Mr Diamond said after the bank royal commission “it would seem unusual that unregulated pockets would continue to exist” in the financial sector.

Zip executives said the company was “well placed” regardless of the report's outcome because it conducts credit checks on its customers.

A coalition of consumer groups including Choice, the Consumer Action Law Centre and the Financial Rights Legal Centre have all urged regulators to bring buy-now, pay-later providers under the National Credit Protection Act.

Afterpay has voluntarily instituted some of the act's requirements, including hardship and external dispute-resolution schemes, but it is resisting full banking regulation which would compel all companies to conduct formal credit and affordability checks at shop counters.

 

[bigdog]

Todays Fin review

Afterpay dodges tough regulation from Senate
By Misa Han
Updated Feb 22, 2019

Afterpay and its buy now, pay later rivals have dodged a requirement to conduct costly credit checks before they can sign up customers but may have to do more to ensure their users can afford to repay their debts.

The final report from a Senate committee released on Friday afternoon recommended the government consider in consultation with the corporate regulator, consumers and industry ‘‘what regulatory framework would be appropriate for the buy now, pay later sector’’.

It said the regulation framework should require buy now, pay later providers to ‘‘appropriately consider consumers’ personal financial situations’’ before credit is extended.

However, the committee stopped short of recommending Afterpay and its competitors to be covered by the National Credit Act, which would have required them to conduct responsible lending checks on consumers.

Consumer advocacy groups have argued that Afterpay should be treated as a lender and should be subject to responsible lending laws, which Afterpay has rejected.

It is expensive to run credit checks on consumers and it would have squeezed the profit margin of Afterpay because the average purchase made by its users is $150.

‘‘Unlike other credit providers, these products are not covered by the National Consumer Credit Protection Act 2009 ... and providers have no obligation to undertake credit checks or appropriate measures to ensure their product is appropriate for the consumer’s personal circumstances,’’ the committee said.

‘‘The committee considers that this regulatory gap should be filled.’’

The committee said there is a real risk for vulnerable Australians from adding buy now, pay later products to a mix of other credit products.

‘‘The evidence by buy now, pay later providers ZipCo and Afterpay to this committee suggested that both were alive to these risks and willing to strengthen the regulatory framework that applies to the sector.

‘‘There is no guarantee, however, that future entrants to the sector will take a similar approach.

‘‘There is a clear role for regulators in ensuring that buy now, pay later is subject to proper regulation that will provide consumers with the same protections they would enjoy with respect to products with a similar risk profile.’’

This recommendation goes further than the corporate regulator, which said Afterpay and its rivals should be subject to its product intervention power but they should not be subject to further regulation at this stage.

The committee said the regulation should also ensure consumers have access to internal and external dispute resolution mechanisms.

The committee also recommended extending the corporate regulator’s product intervention power to cover buy now, pay later providers.

In addition, the committee recommended Afterpay and its competitors develop an industry code of practice.

As part of an inquiry into credit providers targeting vulnerable consumers, the Labor-led Senate committee looked into the buy now, pay later sector as well as payday lenders and debt management companies.

In recent years buy now, pay later services have become more popular particularly among Millennials who choose to use the service over traditional credit cards.

Zip reported this week it had more than doubled its revenue to $34.2 million in the six months to December. Afterpay and FlexiGroup are due to release their half-year results on Tuesday.

On Wednesday, before the final report was officially released but after the draft report was circulated among Senators, the share price of Afterpay, Zip and FlexiGroup dropped sharply. The corporate regulator is now looking into the unusual trading in Afterpay and its rivals.

 

[bigdog]

Afterpay dodges tough regulation from Senate

 

[aussymatt]

Afterpay dodges tough regulation from Senate

View attachment 92462

Looking good . I got in on this pretty early on ($9.05) God love the people who want stuff now

 

[Ann]

Afterpay soars after Senate report clears regulatory clouds

The Senate report into the buy-now-pay later (BNPL) sector may not have cleared all regulatory hurdles but it was enough to send Afterpay's share price soaring Monday morning.

Afterpay shares were up more than 18 per cent at noon to $22.27, and rivals Zip Co and Splitit were up 8 per cent and 12 per cent respectively, in response to the release of the report Friday evening which confirmed the sector would not be brought under the onerous provisions of the Credit Act. More....

 

[peter2]

With all the hype and huge trading volumes over the last three days I don't know what to expect after the report is released tomorrow. Price could hit either $25 or $15.

 

[leyy]

With all the hype and huge trading volumes over the last three days I don't know what to expect after the report is released tomorrow. Price could hit either $25 or $15.

Today's reversal was expected as a result of a much better than expected final report from a senate committee.

My view is that there is a very high probability Afterpay will report some impressive growth numbers in the US and a good update on UK expansion. Will it be enough to excite the market? Only time will tell.

It will BO from previous high of $22.50 in August 2018, maybe around $28-$30 with the current volume, hype and FOMO.


If it is the latter (a bad report) I suspect $15 is where it could get punished too.

For the brave, be ready to brace for impact.

 

[bigdog]

Motley reports

Afterpay share price sinks lower on half year results release
James Mickleboro | February 26, 2019
https://www.fool.com.au/2019/02/26/afterpay-share-price-sinks-lower-on-half-year-results-release/

The Afterpay Touch Group Ltd (ASX: APT) share price sank as much as 13% in early trade before rebounding. At the time of writing the payments company’s shares are down just 5% to $$19.46.

Here’s how it performed in the first half compared to the same period last year.

• Underlying sales processed through the Afterpay platform increased 147% to $2.3 billion.
• Active customers increased 118% to 3.1 million.
• Active merchants increased 101% to 23,200.
• Total income jumped 91% to $116.1 million.
• Gross losses of 1.1% of underlying sales, down from 1.6%.
• Late fees as a percentage of statutory income down to 17.6% from 22.5%.
• Net transaction loss of 0.5%, net transaction margin flat at 2.3%.
• Pro forma EBITDA excluding one-offs up 19% to $17 million.
• Loss after tax of $22 million.

How does this compare to the market’s expectations?
According to a note out of Goldman Sachs, its analysts were expecting revenue of $113.5 million and a net loss after tax of $1.5 million.

So whilst Afterpay Touch beat on the top line, it has fallen well short on the bottom line. This may have led to investors hitting the sell button in a panic this morning.

However, it is worth noting that this loss is largely down to significant items such as share-based payments (predominantly non-cash) of $18.1 million and one-off costs related to its international business formation. If you adjust for this, its result would be largely in line with expectations.

What’s new?
Much of today’s result was pre-released in January with its trading update, so there were not many surprises.

But the company did update the market on some of its key metrics so far in the second half, including the continued growth in customer numbers. Since the end of the half Afterpay Touch has grown its active customer numbers by a further ~13% to approximately 3.5 million.

Similarly solid growth has been achieved with active merchants. They have increased 9% since the end of the half to 25,300.

Management also provided an update on its upcoming UK launch. According to the release, preparations continue to track to plan. It expects to officially launch in the UK market during the second half and U.S. partner URBN Group has signalled its intention to work alongside the company in the UK along with other local and international merchants.

Over in the U.S. market management appears confident on its prospects. It said: “Our experience to date confirms that the US scale-up opportunity is clear, supporting an accelerated strategy of reinvesting in the global opportunity.”

As a result, its “near-term focus is on accelerating US and international growth, investing in key brand relationships, platform innovation and broadening global support and infrastructure.” To support this the company intends to spend at least an additional $10 million in mid-term growth acceleration investment activities in the second half. This expenditure will relate to new key merchant co-marketing activities and an increase in fixed operating costs.

It certainly will be worth it if it allows the company to achieve its FY 2022 targets.

Management advised: “This accelerated growth strategy will lay the foundations for mid-term value creation. Following the intended near-term investment, we expect significant operating leverage and EBITDA growth as we scale towards our end FY22 target of over $20 billion underlying sales and net transaction margins of c.2% (post accounting changes).”

Should you invest?
I thought this was yet another strong half from Afterpay Touch and believe it demonstrates why it could be a fantastic buy and hold option.

It is a high risk one given the premium its shares trade at, but I’m confident its long-term growth will ultimately justify this premium.

 

[galumay]

and believe it demonstrates why it could be a fantastic buy and hold option.

Not sure that a business making a substantial loss, with a capitalisation largely disconnected from any form of valuation, could be seen to be a "fantastic buy and hold option".

but I’m confident its long-term growth will ultimately justify this premium.

Have you done the maths to work out just how high and consistent the growth would have to be to make the current price an investible entry point with a reasonable margin of safety? How confident are you the growth will flow to the bottom line at a sufficient margin for the above to be true?

I cant make a case for APT as an investible business at current prices, sure if you hold since IPO or similar then its clearly been a great price performer, but to pitch it as a buy and hold at current levels seems to me to be optimistic at best.

 

[Knobby22]

Not sure that a business making a substantial loss, with a capitalisation largely disconnected from any form of valuation, could be seen to be a "fantastic buy and hold option".

If not for the one off items they would have been profitable despite the massive growth.
You are talking like it's a little tech start-up with no financial figures.
3.1 million customers
2.3 billion in sales of which Afterpay get 4%.
As the dud customers get dropped, and existing customers rebuy the profitability increases.

Assuming growth continues, this year will be 4.4mil customers, 7 mil next year. I think this is very likely and maybe conservative with the UK next later this year.
Once they stabilise, they could easily have 40 billion in sales and get a 2% profit after all costs. Maybe in 4 years.
That equates to a profit of $800 million dollars with growth continuing. At the present capitalisation is of about 4 billion. Of course you have to wait a few years and hope something bad doesn't come out of the blue so you need to discount the price but the present price valuation isn't stretched in my view. I note Bell Potter have a valuation of $25 for this year with a big discount (85%).

I also think there is a good chance of a takeover from a big bank or MasterCard/Visa/Paypal.

I have owned CSL shares for many years and how many times have people said there overpriced? I just ignore them, growth is important. US investors are used to investing for growth (e.g. Amazon), Australian investors just think dividends. Anyone who invested in the banks and Telstra over the last 3 years will be getting a poor return.

That said, Afterpay investors should be prepared to sell if the price gets too frothy.

 

[galumay]

I note Bell Potter have a valuation of $25 for this year with a big discount (85%).

That would be enough to make me sell!! Broker recommendations are good for toilet paper and little else.

Jokes aside, i understand you optimistic arguments for future growth, i just dont see that in any way makes it a "fantastic buy and hold option".

As I said, if you hold from a much lower entry then there is less at risk, but its definitely a speculative buy at current levels.

US investors are used to investing for growth (e.g. Amazon), Australian investors just think dividends.

I think its a lot more complex than that, its dangerously simplistic to think businesses built on a narrative of growth are intrinsically better investments.

Anyway, I hope that those who hold APT continue to see the share price increase and end up rewarded for their conviction in the business.

 

[Ann]

I note Bell Potter have a valuation of $25 for this year with a big discount (85%).

Bell Potter trader's evidence 'untruthful'

Stockbroker Bell Potter accused of cheating man with Alzheimer's out of $1 million

ASIC charges second Bell Potter adviser with fraud

BP would not be my first choice of stockbroker...this is just the stuff you know about....what else?

 

[Knobby22]

Bell Potter trader's evidence 'untruthful'

Stockbroker Bell Potter accused of cheating man with Alzheimer's out of $1 million

ASIC charges second Bell Potter adviser with fraud

BP would not be my first choice of stockbroker...this is just the stuff you know about....what else?

Galumay, Ann

I don't make my buy and sell decisions through stockbrokers but I enjoy reading their research reports as I have an mba. I get the Bell Potter research because I use Bell Direct which has many useful trading tools.

I use tech analysis to buy and sell generally and fundamental analysis to see if I am interested in a company and to size positions and maybe buying more without tech analysis report.

I note you both haven't questioned my assumptions.
What else do you want to know Ann? Don't get your question.

One thing I will say for Bell Potter research is that I originally bought APT shares at around $8 I was pleasantly surprised by their report at the time valuing Afterpay at $23 so I do think their researcher knew his/her stuff.

I know you think this is a hyped up business Galumay but tell me where my assumptions are wrong. You previously stated that I may have confirmation bias but you might have a bias also. Afterpay appear to be going extremely well at present. It is unusual for an Australian business to succeed on the world stage in this manner, though Credit Corp has also been doing OK.