Initial comment and viewAPT’s 1H21 result was below at the NPAT level, but this was mainly due to a one off Clearpay valuation adjustment. We had it slightly ahead of expectations at revenue and EBITDA (ex-one offs).
Overall, we saw it as a good result with strong growth and relatively stable profit margins. APT is doing a deal with Matrix to increase it ownership of APT’s US business from 80%-93%.
APT is trading halt raising a convertible note to fund this and provide capital to accelerate sales. Outlook commentary§ Only broader commentary talking about investing in the platform.
Result detail APT 1H21 NPAT of -A$79m was worse than consensus of +A$12m. However there was a one-off fair value loss booked reflecting the increase in the value of APT’s UK operations (A$64.8m), so the actual underlying loss was closer to – A$15m.APT 1H21 revenue of A$417m was 1.2% above consensus (A$412m) and EBITDA (ex significant items) of A$48m actually appeared above consensus (A$37m).
Overall group margins were relatively stable, e.g revenue margin of 2.2% was unchanged on pcp, and APT’s net margin of 2.2% was slightly up on prior year (2.1%).
Growth metrics are obviously very strong, e.g. sales (A$9.8bn) up 106% on pcp, customers (13.1m) up 80% on pcp, merchants (43.2k) up 73% on pcp.
APT has entered into an agreement with Matrix, who will wave the 35% underlying interest they hold in Afterpay US, Inc, under the Matrix Convertible Notes for approximately A$373m in cash (Matrix transaction). The Matrix Transaction implies an acquisition price that values Afterpay US, Inc (on a 100% basis) at 28% of Afterpays total market capitalization.
Eligible US ESOP participants will be offered an ability to exchange their vested and unvested shares in Afterpay US, Inc at the same implied valuation as the tender offer.
The deal is expected to increase APT’s ownership of APT US, Inc from 80% to ~93% (with the aim of increasing this closer to ~100% over time).
APT is in a trading halt to issue a convertible note (A$1.2bn) with proceeds to fund the Matrix transaction, the cash component of the tender offer, and provide additional capital to accelerate sales.
APT is preparing to launch a Afterpay Money App (separate to its current APT App), which will allow users to manage all their savings and payments activity.
APT Price at posting:
$134.36 Sentiment: Buy Disclosure: Held
