BNPL

Four BNPL stocks that excited the market today

Thu 28 Apr 22, 1:35pm (AEST)
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Key Points

  • A heightened inflationary environment globally appears to be rapidly renewing investor interest in the buy now pay later (BNPL) sector
  • The BNPL accounted for 2% of global eCommerce in 2021
  • Splitit Payments (ASX: SPT) was up 16.67% two hours out from the close

Having received the market’s cold shoulder recently, a heightened inflationary environment globally appears to be rapidly renewing investor interest in the buy now pay later (BNPL) sector, with affordability tools such as ‘instalment solutions’ offered by BNPL players becoming increasingly relevant.

With BNPL now accounting for 2% of global eCommerce in 2021 - and by 2030 estimated to reach US$3.3bn - the sector appears to have successfully embedded itself in the everyday lives of customers globally.

Four ASX-listed BNPL stocks were pushed higher today on the back of highly favourable quarterly announcements.

Laybuy Group

Laybuy (ASX: LBY) was up 9.86% at the open after the smallcap NZ-based BNPL operator announced a lift in its net transaction margin, with the lender making an inaugural profit on its loans in the UK.

Underpinning today’s fourth quarter presentation was a 26% lift in gross merchandise value transacted to NZ$203m.

Other key milestones for the quarter included:

  • Now representing NZ$124m of total gross merchandise value across the network, UK spending grew 39%.

  • Positive cash flow of NZ$6.3m.

  • Customers have lifted 23%.

  • UK growth up 32%, on the prior comparable period.

  • Net transaction margin to 1.2% for the group and 0.2% for the UK.

Management notes key strategic initiatives and growth in active customers and active merchants continues to deliver strong growth across all its markets.

Consensus on Laybuy Group is Hold.

Based on Morningstar’s fair value of $0.19, the stock appears to be undervalued.

Beforepay Group

Beforepay Group (ASX: B4P) was up 3.45% at the open after the BNPL smallcap released a strong third quarter market update.

Pay advances were $87.9m in the quarter, up 213% on the previous period. Due to ongoing refinements to the risk model, management notes net transaction loss declined to 2.2%, down 58% year-on-year (YoY) and 29% quarter-on-quarter (QoQ).

Other key milestones for the quarter included:

  • Net transaction margin (NTM) increased to $1.05m, up from $0.18m or 468% QoQ and up $1.80m from a loss of -$0.75m) in Q3 FY21.

  • Pay advance growth momentum continued with pay advances of $87.9m, up 213% from Q3 FY21 (YoY) and up 14% from Q2 FY22.

  • Continued balance-sheet strength with $35.2m in cash on hand as at Q3 FY22.

Commenting on the result, Beforepay CEO, Jamie Twiss, said:

"Beforepay has delivered another strong quarter of growth, with improvements across all key metrics. Continued momentum in user growth, revenue uplift, and strengthening margins represent another step forward on our path towards profitability.”

Consensus does not cover this stock.

Based on Morningstar’s fair value of $1.08, the stock appears to be undervalued.

Splitit Payments

After jumping 18.42% in afternoon trade yesterday – despite having nothing new to say - smallcap BNPL Splitit Payments (ASX: SPT) was up 14.29% at noon today after the first quarter update revealed merchant sales volume (MSV) of US$101m for an annual gain of 23%.

Over the 12-months, the BNPL’s active merchants increased 43% YoY to 1,300.

Other key milestones for the quarter included:

  • US$25m in available cash.

  • US$150m Goldman Sachs credit facility.

  • Net cash movement 73% improvement on prior quarter.

  • Refreshed growth strategy under new CEO Nandan Sheth leveraging Splitit’s unique technology through:

  1. Enhanced focus on distribution partners to drive growth.

  2. Unlocking BNPL for issuers at the merchant Point of Sale.

Sheth believes Splitit is uniquely positioned as it bridges the gap between BNPL and credit cards by making instalment payments possible on any credit card purchase at the point of sale.

“With an average order value above US$1,000, Splitit has the ability to increase order values for merchants by utilising the available balance on a consumer’s existing credit card, without dissolving the shopper’s loyalty to the merchant’s or card issuer’s brand,” Sheth noted.

“By operating on the existing card rails, we can penetrate a substantially larger addressable market, while still delivering the popular consumer benefits of BNPL. This is an exciting and unique opportunity for our company.”

Consensus on Splitit Payments is Strong Buy.

Based on Morningstar’s fair value of $0.46, the stock appears to be undervalued.

Openpay Group

Openpay Group (ASX: OPY) was up 1.61% at noon today after releasing a quarterly business update for the period ended 31 March 2022.

Underscoring the quarterly update was robust growth and strong margins in A&NZ with solid progress in the US.

Total active merchants of 4,200 was up 24% compared to previous period, while total group Revenue (including OpyPro) reached $8.7m, up 32% compared to previous period.

Other key milestones for the quarter included:

  • Total Active Customers of 589,000 up 17%.

  • Total Active Plans of 2.4m up 41%.

  • Total Group total transaction value (TTV) of $94m up 14%.

  • Global revenue margin improved from 7.8% in Q3 FY21 to 9.1% in Q3 FY22.

Ed Bunting interim Group CEO notes the group made some tough decisions earlier this year to reduce its UK operations while focusing on A&NZ accelerated pathway to profitability and the US as the BNPL's key growth engine.

“The renewed strategic direction is delivering strong financial performance and will create long-term value for shareholders," Bunting said.

We are pleased to restate that our A&NZ business is on track for profitability within 15 months, while we continue to progress our capital strategy to support US growth.”

Consensus on Openpay is Moderate Buy.

Based on Morningstar’s fair value of $0.73, the stock appears to be undervalued.

Written By

Mark Story

Editor

Mark is an award-winning investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics, a diploma in journalism and has completed the Institute of Directors course. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content.

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