The March quarter will enlighten all as to whether cashflow is timing mis-match or structural. If it is in fact a mis-match it will but them more time l remain a cynic in part based on history and in part based on expectations.
I see a company floated in the middle of an over-hyped industry with a balance sheet created with smoke and mirrors that created multi-millionaire management out of fresh air, as it turns out, quite literally. A third hand idea from, albeit he is a nice guy, a person with checkered management history and average financial acumen IMO. Also backed by a Bank with limited commercial skills, as they are predominantly residential mortgages, and one of the reasons for the initial float was that they wanted their loan repaid so it could be restructured to give them greater security.
I now see headline inflation in NZ nearly 6%, 80% of NZ workers received a pay rise of less than 3% last year, petrol is close to $3 a litre and retail sales are looking poor. Mortgage rates are rising, and for many they may not have experienced that before. Many in NZ have been using mortgage refinancing to fuel their spending. In the UK, whose problems are not dissimilar, in fact a worldwide issue, 20% of Britons struggle to pay their basic bills and the BOE have appealed to Britons not to ask for pay rises this year. Good luck with that one!
Now we have the BNPL sector. Subject of much hype and in hindsight over-inflated expectations in some instances.You also have an environment where there are cyclical moves by money managers from growth related tech to value.
Within the BNPL sector you have a small player, with initial heady growth starting to slow, with a customer base who historically haven't been good at paying their bills. You have an environment where it is harder for those who struggle to meet their commitments and will get harder again. Their gross losses as % of GMV have been bad almost from day dot. This is not a new thing. (3%), (4%), who cares, it spells cash burn in an environment that is and will deteriorate. Costs are too high, margin is too low and customer base cant, won't, don't intend to honour their commitments.
Whether or not its a timing issue may be irrelevant in the long run. Its possible there is a trade here. Still thinking lower lows and lower highs, but a trade, maybe. Do I think there is a long term future here. I watched because there was a chance, a maybe. I don't think that is the case anymore. Coin toss, one side is a sigh of relief and a 70% bounce back up to 0.19. The other side just says bugg.r.
LBY Price at posting:
12.5¢ Sentiment: Sell Disclosure: Not Held
