I hadn't actually seen that given I only had a very brief look. That gives an annualized run rate of 240m already and then a net revenue of approx 10m giving a CURRENT P/S ratio of only 40x for a very explosive growth story. Say they can double again (highly realistic) by the end of the FY you get an FY exit revenue run rate of approx 20m. If you assume the operating margin approximates other payments businesses such as visa/MasterCard that is a "profit" on that revenue of approx 10m giving just a 40x PE ratio (if you strip away all the investment for growth and assume maturity- or what I use to make estimates for these rapidly growing businesses).
I will preface this by saying I have absolutely no finance background. But- In terms of the funding...whatever way you look at it, as long as the return on equity > weighted average cost of capital, you will be generating a return. the greater the difference, the greater the return. As my rough calculations show above the ROE is > WACC. In that case all that matters are the constraints on funding (now no longer present after capital raising) and then the 'runway'/unmet demand (for Afterpay- there doesn't appear to be any end in sight). All it now means is onboarding the rest of the retail market (almost a given, considering that a lot of the major players have already signed on).
Again I am not a holder (although am extremely tempted), but am quite happy taking the free option on Touchcorp shares with the additional revenue hit from processing fees on their platform. After the cap raising there is very little immediate risk. I am more concerned about competition and what the major credit card companies do about this- they must have noticed by now. I am guessing if a takeover isn't an option, just copying them without infringing IP in the major international markets before Afterpay gets a foothold can substantially reduce the total addressable market and get extremely messy!
AFY Price at posting:
$2.38 Sentiment: None Disclosure: Not Held
