Broker ADD - Shaw ($15.36): Morgan S ($12.10)

Really good to see a strong upgrade from both brokers, in particular Morgan Stanley who upgraded from $7.86 (Jan) to $12.10 (Feb). With positive outcomes from the US stimulus and the likelihood of another NASDAQ selloff reduced we should hopefully see a positive week as both Zip and APT were oversold.

ZIP US growth encouraging:
- Australia remains cash EBTDA positive with the group now Cash EBTDA breakeven.
- Z1P has launched in the UK with a number of marquee brands and pointed to a strong pipeline.
- Quadpay’s 1H21 growth was rapid with TTV (A$973m) and customers (3.2m) both up >200% on pcp
- Quadpay’s net transaction margin remains above 2% and this business has improved group capital efficiency, highlighted by an improving repayment velocity and also revenue yield (25% in Dec vs ~16% in June 2020).
- Z1P is now Australia’s most downloaded BNPL App (Dec20/Jan21) while all key growth metrics, e.g. revenue, and customers etc, grew ~40%-60% for the half.
- Average funding costs reduced from 4.7% to 3.9% due to a lower average rate across the AU portfolio.

Z1P continues to trade at a significant PS discount to APT (20x vs 35x). Based on a number of Peter's interviews over the past few days it does sound like a US listing is likely as they want to close the valuation gap whilst also ensuring the best outcomes for investors