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Ann: Leading Online Education Player Joins ZML Platform-ZML.AX, page-12

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ValueTrader82

656 Posts.

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31/08/16

14:51

Post #: 18826863
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Originally posted by bubby ↑

VT, this is how I see it.

I note that you measure 'cheapness', and rightly so, relative to its peers on fundamentals. For example you mention flexi group with it's low p/e.
However, I don't measure value that way. I measure value based on future outcomes. While ZML will need to keep adding merchants (to access customers) to grow revenue in order to turn a profit (FY17), they continue to measure up with their customer base (merchant and creditees), and while they continue to do so, then there is value in the coy, as it signifies continued growth. If they stall in this model, then that would be concerning, but they continue to 'sell' their offering very well. All is on track.

I think Flexi is quite OK, and is good value too, but they are not the same. Flexi are relatively new to the 'ezi-pay' type service, while they now have to exit a number of what they now call 'non-core products'. There are big differences with AFY too, for example where they use a licensed platform whereas ZML own theirs. I could delve into this more deeply to explain further my rationale for value, but don't have the time!

Since feb the SP of ZML has amost tripled. At every time point since Feb, if someone called it 'overvalued' then that is just a perception of value. It might be overvalued based on what you actually get 'right now' on fundamentals, but it in hindsight it was cheap, becaue the reality is, the SP has almost tripled. Being an overvalued coy is not the same as 'not cheap'. It might not be worth 82c fundamentally, but it is still cheap. Why, because while the trend continues it is cheaper today than tomorrow. I predict the SP to double again by 6 months time. The SP may not still be worth it on face value but it was still cheap in hindsight, becuase of growth prospects.

The only sticking point for me, which is definately not ZML specific but for any finance lender in general is that I feel it doesn't sit well with me morally. It's just my view but I think if you can't afford a $1000 product at that moment in time you want it, then you should not be able to buy it. It plays on human nature of instant gratification. None of these companies, including the banks, provide nothing more than credit. They call these things 'products', but they don't actually produce anything. It's not like a farm where you actually get real growth and value in tangible product. I guess I just have to accept that if we live in a world of credit, and if you are going to get it, then it should be done as ethiclly as possible and I think with ZML they may well be paying less in fees than from many, if not most other players at this point in time.

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Mate,

Now that they have released more recent figures, I am even more bearish - on the business... and business alone... I am not talking sentiment, here which is what all broker reports talk about... to me thats just pie in the sky.

Why?

Ill tell you..

Zip have done little over $4m in revenue since inception, and have lent $50m or there abouts.... that means, for each dollar they lend, they are making 8 cents or 8 % yield on its book... pretty slim margin.

Compare that to other lenders in the market, Flexi being the best direct comparison... a $1bn book and $400m in revenue... so for every dollar lent it makes 40 cents... or 40% gross margin... thats huge by comparison.

So while it isWonderful that ZML is growing over 1000% P.A, its growing at an unsustainable rate, if it were to have a $1bn book it would only maybe do $80m in revenue... yet as shareholders, you would have had to dilute another 10x, to get the equity up in the business to support it.

So once again, beyond making money on speculation and hype, this business is HUGELY overvalued, and time will correct that... not saying you cant make money in the short term, I just dont think the model is sustainable... as for AFY... ditto.

Last edited by ValueTrader82: 31/08/16

ZML Price at posting: 78.5¢ Sentiment: None Disclosure: Not Held
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