Done a reasonable amount of work on Latitude.
Here goes:
BENCHMARKS
Pre IPO work has identified the following major benchmarks :
Used Flexigroup, Afterpay and BOQ. ( They mentioned all theAustralian banks ) In USA used Capital One, Discover Financial and SynchronyFinance.
PROFITABILITY
Did not have as much financial visibility on USAbenchmarks but for three Australian companies very interesting.
PBT as a percentage of total revenue is 30% for Latitudeversus 21% for Flexi Group , 22% for BOQ and negative 12% for Afterpay.
Three USA companies PBT ranges 26 to 34%.
Latitude performs well here.
EBIT to total revenue for Latitude is 47% versus Flexigroup42%, BOQ 72% , Afterpay 11% and USA companies range 38 to 55%.
Latitude performs well here
Latitude bad debt write off at 19% of revenue, Flexigroup at19% and Afterpay at 22%.
All surprisingly similar.
Latitude wages to revenue is 17%, Flexigroup at 19% andAfterpay at 31%.
BALANCE SHEET MEASURES
Equity to total assets for Latitude is 15%, Flexigroup 20%,Afterpay 79%, BOQ 7%. USA companies in range 10 to 15%.
Latitude in range here
ROE for Latitude is 21% versus Flexigroup at 11% , BOQ 9%,Afterpay 5% negative and USA companies in range 12 to 25%.
Latitude is a good performer here
PRICING
At top of range, $2.25 then Latitude is similar toFlexigroup, more expensive than BOQ and significantly more expensive than USAbenchmarks.
At bottom of range, $2.00 then Latitude is cheaper thenFlexigroup more expensive than BOQ and significantly more expensive thanUSA benchmarks.
I have excluded Afterpay as it is stratospheric .
AFTERPAY
So why does the market like this model.
I have not looked at its financing model in depth but itgenerates 32 cents in revenue for every $1 in assets. This compares withLatitude at 15cents, Flexigroup at 15 cents , BOQ at 4 cents.
USA benchmarks in range of 8 to 20 cents.
In short, look at the classical old bank , BOQ at 4 centsversus Afterpay at 32 cents.
If Afterpay gets this right they should make a lot of moneyas their asset base seems to be a lot more productive in generating revenue.
OTHER COMMENTS
Evidently the institutionalsessions have gone well in Australia and now they are off to USA , UK etc. Icannot see them getting much interest from USA given high pricing of Latituderelative to USA benchmarks as identified by lead brokers.
CONCLUSION
At this stage I’m thinking that at $2.00 it is worth a puntbut not at $2.25.
WHAT ARE YOU HEARING ?
