So Afterpay is still a buy then?
Corporate BondThey want to target expansion rather than profitability.
Now they've gotta pay their corporate bond coupon and principal payment very soon. If you're not going to be profitable, how will they pay that massive amount back? Refinance, tap into existing shareholders again, refinance or call in administrators. Yes - I'm not going to rule out "call in administrators" scenario.
15% gratificationReflecting back to what we saw in the recent report, they made a big deal about how their
"other income," which is pretty much "late fees," was sitting around 15% of their income or revenue. This is an unsustainable business model. They've gotta
bring it down to less than 5%, and it has to be done extremely soon. How though? Maybe founders can think how to achieve that by sitting at the balcony of their multi-million properties acquired by selling shares.
Brilliant move. This is when share price was high. And now all of sudden they want to target expansion and leave profitability, so leave regards for the share price and let retail worry about it, why should they care. They've already taken what they came in for. Expenses will go though the roof, downgrades will come soon, then retail investors are left holding the bag. Rinse and repeat. Nothing new.
ImpairmentsNow, we all know there's no credit checks and this is why this business model has thrived. When you approve non credit worthy borrower small amount, they don't pay it back. Surely there aren't many, right? Well it turns out they've always been there and they are not going to go away anytime soon.
APT had $47.8 million in bad debts which had to be written off this half-yearly. We'll that
is
30% off their gross profit wiped off. This is also 21% of their revenue. Yes 30% is simply getting wiped off from their gross profits. This is another sign of a shaky business model.
So if they made $100 million then at this share price they are trading at 87 times profit. What if they manage to pull a cool $50 million in profit, then they are trading at 156 times profit. But they won't, because they want to target expansion with a flawed business model.
Geniuses.
Founders have one more card left. "Economies of scale". Even if they pull a quadruple sales volume this year or 300% growth (probability "nil") and take their 3.7% approx commission on sales, valuation is still on a single digit with strings attached. If I run into them, I'd politely ask them to start preparing their capital raising speech to banks and institutions and dilution speech to retail investors from now.
If Jim Cramer covered this stock, he'll roast this company alive on live air.
Can someone at least give me name of a BNPL company that makes money? Please.
