While you are correct on the NPAT margin, your conclusion about...

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23/05/20

20:09

Post #: 44795997
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Originally posted by upside_down: ↑

NTM does not equal earnings... it doesn't even include employee costs. It's the marginal transaction profit. Taking out other costs and tax you'd probably see 0.7%. UBS estimates NPAT as a percentage of GMV at 0.64% by 2024, with a 2.0% NTM.

So a $130b GMV in 2025 would give you $910m NPAT with a 0.7% NPAT margin. With a peg of 1 and assuming 50% growth (which is more than paypal was getting at $130b gmv) that's a P/E of 50, so $45.5B market cap IN 2025.

Then with the shares we currently have 270m on issue. Add 40m for the UK and US deal. Then add another 60m at average $50 SP to raise the $3b they'll likely need to service $130b GMV. Gives 370m shares. This is likely conservative, will be many more share based payments over the next 5 years both to executives, employees, and for new deals in new markets to be able to reach that $130b AND 50% YoY growth prospects.

So SP would be $123 in FY25, sounds good, but it is currently FY20. So that'd give you a 2.76x multiplier on today's share price, or a yearly return of 23%.

None of us are here for yearly returns of 23%, I'm certainly not. 23% is not enough of a risk/reward given risks to growth in GMV, risks to NTM from bad debt/competitive margin pressure, and general market risks which could halve P/Es again.

TLDR: APT is not at an attractive entry price for long term investors.

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While you are correct on the NPAT margin, your conclusion about the long term investment at this price isn't correct. I think what you overlook is the customer usage frequency story and the organic impact on GMV growth from existing customers. With more users they add to the platform they are no where near the top of the bell curve in customer frequency. So if after 4 years the average customer use is 23x , their GMV will organically grow with or without new customer additions. With US offline coming (much easier process, faster scaleout planned than Aus/NZ), Canada, UK, online/offline etc....there is a lot of upside on GMV.

The other story is the NTM and we have seen that this improves with time as a larger proportion of sales come from existing and regular paying customers.

I can still see a clear runway to 5x from here looking at just the GMV potential. Thats pretty good, especially with a variety of optionality open to them with such a big customer base. Not including China either or continental Europe.

APT Price at posting: $44.51 Sentiment: Buy Disclosure: Held
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