I agree Smartpay is at least half price. Its growth is simply...

I agree Smartpay is at least half price. Its growth is simply phenomenal. The Australian Acquiring business has gone from none in FY18 (March), to launch in FY19, ending that year with 3000 terminals, to run rate revenue of $48m based on the June 22 quarter.

I think there is a third reason its been missed by the market (apart from fact that professionals don't look at small caps). You do need to value the NZ business separately. That's been muddied by expenditure on starting up the Australian acquiring business. Its actually pretty simple though. In both FY17 and FY18 (pre Australian acquiring), Smartpay EBITDA was $9.6m, with average capex (buying terminals etc) $3m - there was also intangible capex over those two years of $9.2m which was primarily the development of the acquiring business. That EBITDA/cash flow, no growth but stable and with large market share in NZ, was valued at c7x by the Verifone bid at the end of 2019. The deal only fell over because of Covid, so I think $70m is still a reasonable proxy for what NZ is worth. EBITDA in FY19 fell to $6.4m but that was to be expected on start up expenditure in Australia.

So in terms of valuation, using EV $165m (NZX market cap at close $169m less $4m net cash), the Australian acquiring business is being valued at $95m with run rate revenue of $48m that is growing at a rate of 79% (YOY June quarter growth). Having only addressed a tiny fraction of the market and competing only with the big banks, it doesn't look right. Its hard to value early stage businesses like this with very high growth but could make an argument for 10x revenue, at the high end of SAS type valuations so $550m EV.