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Andredamus1

2,143 Posts.

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27/02/19

17:03

Post #: 37590523
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Originally posted by mal85: ↑

Thank you for putting up your calculations. The problem with modelling is that everyone uses assumptions they are comfortable with, rather than empirically what is happening. To know empirically what is happening, you need to have statistical base rate information. The beauty of Afterpay is that there is excellent base rate information.

I think given too many moving parts a base rate PS ratio is better than PE if is scales. EBTDA margins in Oz are around 25% so normalised PE (low % TDA) should be approx 4x the PS ratio. So a PS ratio of 5= normalised PE of 10, 10 is 40 etc. Given growing at > 30%pa a sales multiple of 10 is justified (IMO).

If you normalise to total market size, the uptake in the US is very slightly quicker than uptake in Australia. This means that customer numbers should approximately double every 3 months up to 5% market share (so looking at about 7m users by this calendar year end) + 4 in Au/NZ. ARPU starts low and increases progressively by 30%pa give or take.
So 11m users with ARPU of 50 gives a spot (not TTM) revenue in the order of 550m AUD CY19.
US users should be 28m give or take by CY20 IF the Aussie trajectory is followed. Similarly if UK follows AU (complete unknown currently) then we can estimate 5% market share by CY20 or about 2M users. So CY 20 looking at c35m users and blended ARPU of approx $60 which is 2.1B. We will know within the next 6 months if this is panning out, but if so, everyone’s published models are way off.

This is the problem with exponential growth- humans suck at modelling it. It seems scarcely believable, but based on the evidence so far I think this (ballpark) outcome is more likely than any other.

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Definitely agree re the difficulty in modelling extremely high growth companies. Whilst your numbers are a fair bit higher than my base case, I'd be interested in what value you would place on the company at the end of this year if they do hit your numbers? Also, do you think they would need to raise additional equity this year to support that growth profile?

APT Price at posting: $17.64 Sentiment: Buy Disclosure: Held
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