STTCOMP SZL FA LONG
SZL - Sezzle
Mkt Cap - 455m (at $2.30)
Shares on Issue - 198m
Cash - 27.5m USD (c. 40m AUD)
Sezzle (SZL) is in the Buy Now Pay Later (BNPL) space with operations exclusively in the USA and Canada. It has targeted those markets because the BNPL ecosystem is 2-3 years behind that of ours here in Australia with the rapid scale only now beginning to be achieved and adopted by the consumers.
SZL has been listed on the ASX for 4 months and conducted its IPO at a price of $1.22/share. Since listing, it has had a range of $1.95-$2.86 which can be considered very tight for a stock that debuted at almost a 100% stag from IPO price.
The most recent 4C showed that SZL, which already had significant traction in the US/Canada markets, is accelerating further.
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The underlying merchant sales (UMS) per quarter is now a respectable US$68.8m (c. AU100m) and this is a huge milestone for this business. As I mentioned previously, the growth is actually accelerating from previous quarter as the previous quarter saw UMS growth of 48% (US 41.9m from US 28.3m).
Furthermore, these numbers aren't 'small' anymore, so the business is generating serious traction.
Add to this, the 'engine room' of any BNPL business is the number of merchants it has on its books. For SZL, this metric is also growing at a very rapid rate.
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What is worth noting is that at the end of FY2018 (last year) APT (afterpay) had 16,000 merchants on their books which accelerated to 32,000 merchants at the end of FY2019.
SZL already has 7,500 merchants on their books and accelerating the merchant acquisitions at a rapid rate (+2500 in the last quarter)
Sezzle is very much under the radar with respect to BNPL coverage within the ASX as it only has 1 broker (the lead in their IPO) who covers the stock, being Ord Minett and it has very limited retail shareholder coverage (as can be anecdotally seen by the lack of conversation / views on the SZL hotcopper page).
IMO this is about to all change as SZL has reached an inflection point and will begin to re-rate significantly. Earlier this week, it was featured in a Forbes article re: BNPL and mentioned in the same breath as 2 of its US competitors being Klarna & Quadpay (interestingly they didn't mention Afterpay at all)...
SZL also has a partnership with VISA's CyberSource payment management platform which has over 400,000 businesses on its service. Quoting the company directly
"The company expects to see the positive impact of this partnership on UMS in coming quarters"
The Forbes validation, along with the accelerating UMS numbers and Merchant numbers tells me that the re-rate is about to kick into gear as only as recently as yesterday Citi upgraded APT solely on their US traffic numbers, the 'read through' being that the US BNPL space is really heating up by way of acceptance
