Ann: Change of Director's Interest Notice, Philip Crutchfield, page-20

Actually a good sedge-way... perhaps we can open the forum for some of the newbies,  with sub 20 posts all (on z1p related threads) to engage on an objective level and contribute to the thread(s) meaningfully, beyond referring to other posters as fanboys... I for one am equally critical of Afterpay and the whole space for that matter, the way brokers are valuing players, and the way ASIC are failing to adequately govern it.

First off, I believe the Z1p team are talented guys, I believe their push to regulate the space IS the right way forward... responsible lending is key for the BNPL space, particularly if there is any intention to weather the looming credit crunch storm.

I am not prepared to comment on the NED selling his shares, as the afterpay guys sold down 10% at a valuation that seemed astronomical, and the SP has only 3x sinced then... However, their DCFs and projections alteast somewhat align to their valuation, far more so than Z1ps.

On the investor side, it seems the space is now frothy, full of retail punters, who are jumping between the various listed players, like a game of hopscotch... and based on most of the  the general feedback, investors are still completely discounting the inherent risk prevalent to the space - namely that of the credit risk associated with holding all clients exposure on your own balance sheet... These businesses ( except splitit who really arent doing any lending of their own - and I am yet to form an opinion of, although @Warnie has kindly guided the way on) are not typical tech businesses, valuing them on revenue multiples or even aggresive EBITDA multiples almost always ends in tears after growth slows ( just look at any of the big names listed on the Nasdaq), as bad debts are always under realised during growth phases, then wash over said businesses in maturity, washing away any projected profit. I'm sure many Splitit punters think Z1p looks like a relative bargain by comparison, so are jumping ship and taking a profit..

With that said, the underlying economics of Z1p are different to its peers, and potentially questionable as @Gillysrooms pointed out.. obvious points of note:  The business is not really scaling in a capital intensive/burning manner, with costs not scaling down as projected... its got a  slow turning book, yielding moderate top line turns for what seems like a high level of risk - Doubtful debt expense is already equal to the businesses cost of funds per quarter, meaning real bad debts are >5%, despite actual write offs showing a far lower number.  

The company is clearly going to miss its FY19 earnings by a pretty material amount, despite achieving 20% higher top line sales ( which I believe is part of whats fueling the rally), yet is no closer to breaking even, than they were projecting to be at circa $60m revenue...

The company is also highly geared, which is being exacerbated by its losses, which in turn is eating away at the equity base ( now $24m, down from $33m, 6-9 odd months back),  required to support its growing book - so a near term raise is clearly looming, as this is a capital intensive business to say the least.

If you just pull a few broker reports - a current one, and one circa 9 months old, we can see:

1)9 Months ago, Break Even was expected in FY19 - which has now materialized into a > $10m loss.

2)Brokers were looking for a circa 18x forward EBITDA.. today they are now looking for 52x forward - which is getting up there to say the least.

3) 2021 profit is off a book of $1.1bn... which will require atleast another $50m-100m to support, by that stage, growth has significantly slowed

4) Their valuation comes off free cash flows of only $184m up from $136m as previously discussed ( @Warnie @Christos12 ) and franking credits - I'm assuming attributed to it being a mining shell, now make up a random $306m of value... which seems quite outlandish, considering 10 years worth of free cashflows need to be atleast $500m+ to justify anywhere near the valuation... this is all pretty questionable info - pretty much sums up the state of the ASX .


                                                 Current Projections
 

         9 months ago 

    Obviously DYOR ... but hopefully this inspires some constructive discourse, as opposed to juvenile name calling.