Australian (ASX) Stock Market Forum

APT - Afterpay Limited

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McLovin said:
I'd argue someone who requires time payment services already has low savings. That's confirmed when you see the demographics of the average APT and Z1P user; young women, not a demographic associated with high rates of savings. If they were to lose their job, do you think they'll be making their time payments for the $1,000 of clothes they just bought on The Iconic or paying things like rent and food? Bad debts will explode for a company like this. These guys need two things, fast payment so they can churn their lending book and keep collecting merchant fees, and low bad debts, because their return on capital isn't that amazing.
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Perhaps you're right, but I don't think that will prevent people from using the service in times of recession. Sometimes they won't have a choice. If the fridge goes on the blink and there's no cash to get another one, taking advantage of interest free credit options can become a matter of necessity.

I wonder if there is any research data on the uptake of interest free credit in times of recession. I remember when it seemed as though almost every white goods retailer was offering six months interest free on purchases over a certain amount. This option proved so popular that the credit facility was eventually extended to up to 24 months if people spent more so as to entourage people to buy and spend more. The only way Afterpay differs is that the repayment terms are reduced to four payments every two weeks. This encourages people to use it for smaller purchases which are generally more manageable.

Afterpay are relying on people's poor decision making and financial irresponsibility to generate revenue. if everyone paid on time they would go bust. I think you will find that in a recessionary environment they are likely to introduce more flexible terms over longer time periods. I'm just speculating but such changes would make sense in order to increase uptake of the facility.
 
Just having a read though the posts. Some people seem to think APT makes money by people failing to pay on time and paying late fees. The company figures actually show that it's extremely low. Almost everyone pays on time, and the amount of money coming in from late fees is lower than the amount of money lost on people defaulting and never paying, which is also extremely low. These figures are an irrelevant part of the overall picture.

APT makes its money from retailer fees. About 4.1% of the purchase price goes to APT when a customer uses Afterpay. That's virtually the entire thing. They don't want people to be late and pay extra fees, and the late fees are only there as an incentive to pay on time.

It's completely different from credit cards, which do make their money from people being too stupid to either pay upfront or repay their debt on time, and accumulate even increasing debt. APT's system actually doesn't continually increase if someone is in arrears. The late fees are small and capped, though the customer won't be able to use Afterpay. This ensures that only good customers are repeat customers, and the repeat rate is huge.

It's actually a really good business model.
 
noting that the big retailers avoid fees by passing a charge onto the consumer. ... small detail to throw into the mix
 
Sdajii said:
Just having a read though the posts. Some people seem to think APT makes money by people failing to pay on time and paying late fees. The company figures actually show that it's extremely low. Almost everyone pays on time, and the amount of money coming in from late fees is lower than the amount of money lost on people defaulting and never paying, which is also extremely low. These figures are an irrelevant part of the overall picture.

APT makes its money from retailer fees. About 4.1% of the purchase price goes to APT when a customer uses Afterpay. That's virtually the entire thing. They don't want people to be late and pay extra fees, and the late fees are only there as an incentive to pay on time.

It's completely different from credit cards, which do make their money from people being too stupid to either pay upfront or repay their debt on time, and accumulate even increasing debt. APT's system actually doesn't continually increase if someone is in arrears. The late fees are small and capped, though the customer won't be able to use Afterpay. This ensures that only good customers are repeat customers, and the repeat rate is huge.

It's actually a really good business model.
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Very good post Sdajii.
just like to add that I see the risk to the business as the people who don't pay on time. If this is too high, defaults wil rise and cash flow will reduce. The second risk is fraud. It will be interesting to see what happens in the USA. I am worried that the fraud rate will be higher also USA competitors like Visa and Mastercard might set up a competitor. On the plus side if they can make it work in the USA then the world is their oyster.
 
HelloU said:
noting that the big retailers avoid fees by passing a charge onto the consumer. ... small detail to throw into the mix
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The retailers get an instant lift in sales - thats the pay off, thats why they sign up.
Knobby22 said:
USA competitors like Visa and Mastercard might set up a competitor.
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They are competitors, Afterpay is taking sales from them for sure.
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I am surprised at the low rate of fraud and default in Australia, but it is what it is and the proof is in. I agree, it may well be higher in the USA, and it'll be interesting to see. No doubt they've thought more about minimising it than we ever will, and I'm guessing it won't be significantly higher there.

I do have my doubts about the USA being a market they can capture as large a percentage as they have in Australia of. There are more competitors operating in the USA for the 'I can't budget and want it now and would rather frig around later than think ahead because I need instant gratification' market, but they may also have a larger number of morons fitting the target, so the market there might be even larger than the population size suggests.

As may be clear, I have low respect for the typical person who would use this service, but I fully understand that they are plentiful and ripe for exploitation.

The major issue I see at this point, and the only reason I haven't bought in, is that enormous growth is already factored into the share price. Even if the realised growth is 10x the current size of the business, the share price is much too high. The business of course will thrive regardless of the share price, but it's possible to pay far too much for a good thing and lose a lot of money. On the other hand, I can see the potential for APT to grow enough to justify an even higher share price than what we currently have. Being so difficult to evaluate, it is a challenge to get a grasp of the risk/reward situation of this one. What I can say, is that *if* it ends up as well in the USA as we can conservatively say it will in Australia, I have no doubt it will have a share price higher than what you can buy it for now.
 
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Afterpay announces UK expansion as sales volume soars


ASX ANNs today

REQUEST FOR TRADING HALT
Afterpay Touch Group Limited (ACN 618 280 649) (ASX:APT) (Afterpay) requests the securities of Afterpay be placed in trading halt with effect from the commencement of trading on 23 August 2018.

1. the trading halt is requested pending an announcement by Afterpay in relation to a proposed corporate transaction and capital raising;

"Afterpay said it was raising $108 million via an institutional placement to bolster cash in order to fund international expansion and secure new loan facilities in the US and British markets."

---------------------------------------------------------------------------------
FY2018 Results Announcement
AFTERPAY TOUCH GROUP LIMITED
(ASX: APT)
ASX Announcement 23 August 2018
FY2018 Financial Results (all currency figures are in Australian dollars unless otherwise stated)

Afterpay Touch Group Limited (the Company) today released its results for the full financial year ended 30 June 2018.

FY18 Highlights:
In line with the Company’s business update on 19 July 2018, the key highlights in relation to the

FY18 financial results are as follows:
 Strong financial performance in FY18, driven by strong growth in Afterpay and a full year contribution from Touchcorp (post‐Merger)

 FY18 Group Revenue and Other Income of $142.3m, up 390% on FY17, driven by an increase in Afterpay underlying sales and a stable merchant revenue margin

 FY18 Group EBITDA (excluding significant items) of $33.8m and EBTDA of $27.7m, up 468% and 380% respectively on FY17

 FY18 Group performance materially driven by the contribution of the Afterpay business. Top line Afterpay underlying sales and revenue growth has been complemented by improving transaction profitability:
- FY18 Afterpay underlying sales of over $2.18b, up 289% on FY17

- FY18 Afterpay revenue and other income of $116.8m, up 302% on FY17
- Afterpay Net Transaction Losses reduced to 0.4% of underlying sales in FY18 (versus 0.6% in FY17) demonstrating customers are continuing to use the platform responsibly

- Afterpay Net Transaction Margin increased to 2.6% of underlying sales (versus 2.5% in FY17), despite increased finance costs in line with Afterpay’s receivables book growth

 Group Statutory Net Loss After Tax was $9.0m, which improved by 7% on FY17 despite the impact of large, non‐cash related significant items (share based expenses and D&A) and one‐off costs:

 Non‐cash share‐based expenses ($16.4m) related mainly to the accounting impact of the Company’s share price movement since the proposed grant of the Group Head’s LTI in August 2017, which remains subject to shareholder approval

 Non‐cash D&A expenses of $17.3m principally related to a full year contribution of Touchcorp and the fair value uplift of Touchcorp’s intangible assets resulting from the Merger

 One‐off costs (net of fx gains) were $1.6m, mainly related to the Merger and international expansion activities

 The Group will adopt AASB 9 for the FY19 reporting period. Due to Afterpay’s very short receivables cycle, the impact is estimated to be relatively limited as it relates to Afterpay’s receivables impairment and revenue recognition methodology:

 FY18 pro‐forma AASB 9 estimated impact on Afterpay NTL is an increase of 0.1% from 0.4% to 0.5% of underlying sales. The Company is confident that its receivables impairment methodology is currently conservative and will be even more conservative post adoption of AASB 9

 FY18 pro‐forma AASB 9 impact on Afterpay merchant fee revenue is a reduction of $3.0m, if 100% allocated under AASB 9. A deferral of merchant fee revenue in this manner is a timing difference only and does not impact the receipt of cash when an order is processed

 The Group maintains a strong balance sheet at year end with significant cash resources ($49.2m) on hand and in‐trust. Additionally, Afterpay’s receivable portfolio remains conservatively geared with substantial unutilised facilities in Australia and New Zealand

Significant Developments Since Business Update On 19 July 2018:
 The Afterpay business continues to grow post year‐end with respect to all key metrics:

 Active customers are currently in the order of 2.3m and approximately 17.7k merchants are on‐boarded and transacting on the platform

 New customer growth and repeat customer engagement metrics are at strong levels relative to FY18 metrics

 Afterpay coordinated retail event (‘AfterYAY’ day) on 16 August 2018 resulted in the largest underlying sales day in Afterpay’s history

 Significant new retailers and merchants in Australia and New Zealand that are recently onboarded or are in the process of integrating (no material contribution to underlying sales in FY18)
 
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$22m in write offs last year with ~$250m in receiveables. The year before it was $3m in write offs on ~$100m in receiveables. I thought these were not subprime borrowers?
 
another great day to help my ASF 2018 year share tipping

institutional placement must be laughing with the great share price they got
-- APT has successfully raised $117 million via an institutional placement
-- The Placement was priced at $17.05 per share
-- 6,682,200 shares with profit todays close of $27.2 million or 23.3%

A Share Purchase Plan to raise approximately $20 million will follow the Placement with eligible Afterpay shareholders offered the opportunity to acquire additional new shares


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I doubt we will get more than maybe $2000 worth within the SPP. They are very hot.
 
So_Cynical said:
Its capped? i thought SSP's were open slather.
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Under the listing rules they can only issue a certain percentage of shares. You can ask for up to $15,000 but if everyone takes them up there will be a shortage of shares available.
 
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