Afterpay Touch Group (APT) One-to-Many Many Recommendation Buy (unchanged) Price $29.19 Target (12 months) $45.50 (previously $41.61) Analyst Lafitani Sotiriou 613 9235 1668 Authorisation TS Lim 612 8224 2810 GICS Sector Software and Services Expected Return Capital growth 55.9% Dividend yield 0.0% Total expected return 55.9% Company Data & Ratios Enterprise value $7.2bn Market cap $7.4bn Issued capital 252.7m Free float 84% Avg. daily val. (52wk) $59m 12 month price range $10.36-$37.41 Price Performance BELL POTTER SECURITIES LIMITED
Page 1 (1m) (3m) (12m) Price (A$) 34.88 22.48 13.01 Absolute (%) -16.31 29.85 124.37 Rel market (%) -19.34 26.18 109.73 ebay a Game Changer APT announced ebay is set to launch Afterpay in Australia early next calendar year. We see this as a step-change in the Buy Now, Pay Later space. To put this in perspective, APT currently has 40,000 merchants signed up across its four markets, and ebay is set to deliver 40,000 SMBs in one hit. This first step by ebay to offer Afterpay may be a precursor, if successful, to an expanded global relationship with ebay. Coupled with this new relationship, APT confirmed Mastercard has entered into a strategic relationship with APT here in Australia + NZ, which builds on the strategic partnership APT has with VISA in the US. This attention from these powerhouse global tech / payment company / retail marketplace firms is consistent with our view that APT is an emerging global fintech / retail-tech player. Locked and Loaded for New Markets APT announced a $200m placement to Coatue Management, a US$17 billion specialist technology and data analytics fund at $28.50 per share. The two organisations are entering a strategic partnership where Coatue will help support the development of APT data analytics and future data driven products. The $200m has been earmarked for new markets (outside of US, UK, Aust&NZ). We expect to hear news on which new markets APT is set to enter on or before the release of the 1H20 result in February. Earnings Revisions: Growth Tracking Ahead of Estimates Following APT’s AGM, we have upgraded our underlying active customer estimates by between 0.6% - 1.8% over the forward estimates, and we have upgraded our underlying EPS by 2.5%, 4.0% and 4.2% for FY20, FY21 and FY22 respectively. The earnings revision is driven by higher customer growth and Total Transaction Value (TTV) estimates along with some margin changes, while it was offset to a degree by the $200m capital raising. Following these changes and after rolling our average customer numbers forward by 3 months, our revised Price Target is $45.50 per share (previously $41.61), with our Buy recommendation remaining unchanged.
APT Price at posting:
$32.04 Sentiment: Buy Disclosure: Held
