APT (ASX) Ann: FY2018 Appendix 4E and Annual Report

Originally posted by Warnie ↑

Ok reality time..
This will all end in tears IMO.

Capital intensive, reliance on 3rd party cash/ increase funding debt and will be bad debt ridden once through to end of one full credit cycle. I can see it already even with the very limited financial data.

You are a fool if you use turnover metric to justify a low ∼$34m in bad debt/provisioned V $2b sales.
It's actually $142m in rev V bad debt $34m.... from my quick research its at 23% of revenue and rising from previous financial year.

Coming from a finance lending background, and more importantly in the bad credit space, I see many a bank statement with 2-3 Afterpay loans per client.

These clients in particular have bad credit (credit impairment on their credit file) of at least 1 default, a lot have really bad credit, some have 4 or more credit defaults.

I had one Wednesday last week who's in a part 9 debt agreement (form of bankruptcy) and has 3 Afterpays going at once at circa $226 fortnight, client only earns a moderate $565 week (after tax) rent at $295 week, along with part 9 payments of around $190 fortnight. How she eats and lives im unsure?

My guess is they (APT) don't or very rarely credit check, as this would add significant cost to Afterpay's model that already tries to operate at 4% of sales, whereby the Tier 1 credit check cost is around $10 a wack.

Market cap now 32 x revenue, and 120 x EBITA and is running at a loss with increasing bad debt provisions.

Previous financial year 2017 was circa $3m net bad debt on $21m rev or 14%, now its 23% (increasing)
Don't be fooled when they relate bad debt provisions against sales.

I wish them and holders well, the model has some merit, however its a broken model with poor execution, and will come back to bite hard.

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Warnie,
Thanks for your observations re APT.

Below is your assessment of the BIG financials, a company now in administration following revelations of completely false and misleading financial information. Even though many others were under no allusion as to the insolvency of BIG you were still singing their praises.

I hope you will forgive me for not taking your comments about APT seriously.

Warnie said: ↑
P&L Accounts
I'm comfortable that P&L accounts are fine. The conversion from deferred revenue liability to revenue income starts once the customer accepts video and is pro-rated over 12 month contract life.

Why would a "FCC approved" customer's revenue be pro-rated when FCC have then paid the full 12 months at 76% of video offer to BIG?