Analysts
Lafitani Sotiriou 613 9235 1668
Jonathon Higgins 613 9235 8706
Authorisation
TS Lim 612 8224 2810
SpeculativeRefer to key risks on page 7 and early stage company Risk Warning on page
11. Speculative securities may not be suitable for retail clients.
zipMoney (ZML)Explosive growth over quarter
Recommendation Buy (unchanged) Price
$0.79
Valuation (12 months)
$1.41 (previously $1.30)
Risk
Speculative
Expected Return Capital growth 78.4% Dividend yield 0.0%
Total expected return 78.4%
Company Data & Ratios Enterprise value $173.5m Market cap $187.8
Issued capital 237.7m
Free float 61.8% Avg. daily val. (52wk) 202,824 12 month price range $0.30-$0.94 GICS sector
Diversified Financials
Disclosure: Bell Potter Securities acted as lead manager in the June 2016 placement and received fees for that service.
Price Performance
Customer numbers up 88% over the December quarterZML is experiencing explosive growth, with the company adding ~56,000 new customers in the December quarter, which compares to the 63,333 existing customers the company had at the start of the period i.e. they almost doubled their customer base over a three month period (up 88%).
This rapid growth underpins our positive view and is occurring across the business with revenue, the number of merchants and the receivables book all following a similar trend.
The company has flagged a banking facility is expected to be finalised in the current quarter, which will help to support the growth in the business and is likely to be received well by the market when it closes.
We reiterate our view that zipMoney is a disruptive consumer finance and payments company that is making significant progress with a competitive and innovative product offering - as supported by this quarterly update.
Quarterly highlightsCustomer numbers up 88% compared to Q1 to 119,144 (vs our 99,333 estimate);
Closing Receivables Book of $87.7m vs our $86.5m estimate;
Transaction volume of $50.2m vs our $47.7m estimate; and
The number of merchants is up 59% to 2,152 during the quarter.
Earnings revisionsFollowing the quarterly update, The adjusted loss per share in FY17 and FY18 decreases by 11.3%, 35.6% and EPS in 2019 increased by 6.3%. The earnings revision is primarily driven by faster customer growth than we were anticipating, offset
to a degree by a softer total merchant margin (as percentage of merchant sales). Our
(1m) (3m) (12m)
Price (A$)
0.62
0.70
0.40
Absolute (%)
7.26
-5.00
66.25
Rel market (%) 8.46 -8.38 59.35
Buy (Speculative) recommendation remains unchanged and our valuation has increased from $1.30 per share, to $1.41 per share.
Absolute Price Earnings Forecast
Year end June 30
2016
2017e
2018e
2019e
Sales revenue ($m)
4.3
23.9
69.5
123.8
EBITDA (A$m)
-2.4
-6.5
-1.0
8.2
NPAT (reported) (A$m)
-7.1
-8.4
-2.6
6.7
NPAT (adjusted) (A$m)
-2.9
-7.7
-2.6
6.7
EPS (adjusted) (cps)
-2.0
-3.0
-1.0
2.6
EPS growth (%)
n/a
-51%
67%
437%
Adjusted PER (x)
-39.5
-26.2
-79.4
30.6
Price/CF (x)
na
-45.4
-32.0
240.2
EV/EBITDA (x)
n/a
n/a
-167.3
21.0
Dividend (¢ps)
0.0
0.0
0.0
0.0
Yield (%)
0.0%
0.0%
0.0%
0.0%
ROE (%)
-25%
-44%
-13%
25%
Franking (%)
SOURCE: BELL POTTER SECURITIES ESTIMATES
n/a
n/a
n/a
n/a
$1.0
$0.8
$0.6
$0.4
$0.2
$0.0
Jun 15 Dec 15 Jun 16
ZML S&P 300 Rebased
SOURCE: IRESS
BELL POTTER SECURITIES LIMITED ACN 250063907721
AFSL 243480
DISCLAIMER AND DISCLOSURES
THIS REPORT MUST BE READ WITH THE DISCLAIMER AND DISCLOSURES ON PAGE 9 THAT FORM PART OF IT.
Page1
Strong growth in metrics Marching onwards and upwardszipMoney has released its quarterly KPI's and cash flows for the second quarter of FY17. Following a flattening in transaction volume in the first quarter the company enjoyed a strong increase in the key metrics for the second quarter as well as exponential growth YoY. The company now has annualised transaction volume greater than $200m and grew by greater than 50% QoQ. Some of growth characteristics for the second quarter as follows:
Transaction volume for the quarter increased by $17m on Q1 representing an increase of 52% and an increase of 965% YoY;
Customer numbers increased to 119,144 to the end of the Christmas trading period increasing by 88% on the Q1 and by 1187% YoY;
Revenue increased to $4.2m for the quarter representing QoQ growth of 45%,
Number of accredited merchants increased to 2,152 representing ~9 merchants added to the platform per day; and
Customer gross receivables increased to $87.7m, increasing by 47% for the quarter.
With over 2150 merchant's zipMoney is currently achieving sales per merchant of ~$23k per quarter and advised that the top 10 merchants account for only 38% of sales versus what was 51% at Q17. Theoretically the company has said that in some cases it expects to capture up to 20% of a merchants checkout. By back calculating on the transaction volume at this full penetration rate annually, this generates total annual turnover per merchant at
$460k. We believe that this number is to low leading us to the observation that ZML has only a small percentage of the checkout for accredited merchants and that further penetration of existing merchants underwrites the future growth for the company.
Figure 1 - Transaction Volume ($m)
Figure 2 - Quarterly revenue ($m)
$60
$100
$50
$90
$80
$40
$70
$60
$30
$50
$20
$40
$30
$10
$-
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
$20
$10
$-
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Figure 3 - Gross receivables ($m)
Figure 4 - Quarterly repayment rate ($m)
SOURCE: COMPANY DATA SOURCE: COMPANY DATA
$5 | 45% | ||
$4 | 40% | ||
$4 | 35% | ||
$3 | 30% | ||
$3 | 25% | ||
$2 | 20% | ||
$2 | 15% | ||
$1 | 10% | ||
$1 | 5% | ||
$- | 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 | 0% | 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 |
SOURCE: COMPANY DATA SOURCE: COMPANY DATA
Earnings revisions & assumptions Changes to KPI assumptionsThe exponential growth rate and variability of the two product arms for ZML drive into a large number of moving parts for the company. Lending on the side of conservatism in our modelling for ZML we have increased our receivables attrition rate (% of book repaid) and decreased our near term assumptions for the average spend per customer as customer growth is accelerating onto the platform and the observable retail spend in the December quarter. We have further increased the rate of customer acquisition driving overall increases to transaction volume in FY17.
Upgrades to sales and earningsFollowing upgrades to our estimates for transaction volume our estimates for revenue in FY17, FY18 and FY19 increase by 18.1%, 43.2% and 52.3% respectively. The adjusted loss per share in FY17 and FY18 decreases by 11.3%, 35.6% and EPS in 2019 increased by 6.3%.
Figure 5 - Earnings and revenue revisions | |||||
Earnings Revisions | FY17e (new) FY17e % Change (previous) | FY18e (new) FY18e % Change (previous) | FY19e (new) FY19e % Change (previous) | ||
Adjust EPS (cps) Sales ($m) | -3.0 -3.4 -11.3% 23.9 20.2 18.1% | -1.0 -1.5 -35.6% 69.5 48.6 43.2% | 2.6 2.4 6.3% 123.8 81.3 52.3% |
SOURCE: BELL POTTER SECURITIES ESTIMATES
Figure 6 - Key assumptions | |||||||||||||
Period end | FY16 | 1Q17 | 2Q17 | 3Q17e | 4Q17e | FY17e | 1Q18e | 2Q18e | 3Q18e | 4Q18e | FY18e | ||
Jun-16 | Sep-16 | Dec-16 | Mar-17 | Jun-17 Jun-17 | Sep-17 | Dec-17 | Mar-18 | Jun-18 | Jun-18 | ||||
Key assumptions | |||||||||||||
51.5 | 33.0 | 50.2 | 80.4 | 121.9 | 285.5 | 144.7 | 181.9 | 217.3 | 293.9 | 837.8 | |||
-10.8 | -14.0 | -22.2 | -34.3 | -52.3 | -82.1 | -74.0 | -98.0 | -125.2 | -160.2 | -254.1 | |||
40.7 | 59.7 | 87.7 | 133.8 | 203.4 | 203.4 | 274.1 | 358.0 | 450.1 | 583.7 | 583.7 | |||
1.2 | 1.9 | 2.9 | 4.4 | 6.7 | 6.7 | 9.0 | 11.8 | 14.9 | 19.3 | 19.3 | |||
39.5 | 57.8 | 84.8 | 129.3 | 196.7 | 196.7 | 265.1 | 346.2 | 435.2 | 564.5 | 564.5 | |||
21.8 | 50.2 | 73.7 | 110.7 | 168.6 | 122.0 | 238.7 | 316.0 | 404.0 | 516.9 | 393.6 | |||
-31% | -28% | -30% | -31% | -31% | -30% | -31% | -31% | -31% | -31% | -31% | |||
4.3 | 2.9 | 4.2 | 6.7 | 10.1 | 23.9 | 12.0 | 15.1 | 18.0 | 24.4 | 69.5 | |||
8.3% | 8.8% | 8.4% | 8.3% | 8.3% | 8.4% | 8.3% | 8.3% | 8.3% | 8.3% | 8.3% | |||
9,948 | 9,444 | 18,604 | 18,000 | 20,000 | 66,048 | 20,000 | 25,000 | 18,000 | 20,000 | 83,000 | |||
35,000 | 63,333 | 119,144 | 173,144 | 233,144 | 233,144 | 293,144 | 368,144 | 422,144 | 482,144 | 482,144 | |||
20,078 | 49,167 | 91,239 | 146,144 | 203,144 | 134,072 | 263,144 | 330,644 | 395,144 | 452,144 | 357,644 | |||
2,565 | 671 | 550 | 550 | 600 | 2,129 | 550 | 550 | 550 | 650 | 2,343 | |||
51.5 | 33.0 | 50.2 | 80.4 | 121.9 | 285.5 | 144.7 | 181.9 | 217.3 | 293.9 | 837.8 | |||
7.2 | 7.2 | 2.4 | 4.2 | 6.5 | 9.8 | 9.8 | 13.3 | 17.3 | 21.8 | 28.2 | |||
32.3 | 57.3 | 83.5 | 108.0 | 108.0 | 108.0 | 108.0 | 108.0 | 108.0 | 108.0 | 108.0 | |||
11% | 11% | 10% | 11% | 11% | 11% | 11% | 11% | 11% | 11% | 11% | |||
0.0 | 0.0 | 19.3 | 85.6 | 85.6 | 152.8 | 232.7 | 320.3 | 447.5 | 447.5 | ||||
6% | 6% | 6% | 6% | 6% | 6% | 6% | 6% | 6% | 6% | ||||
32.3 | 57.3 | 83.5 | 127.3 | 193.6 | 193.6 | 260.8 | 340.7 | 428.3 | 555.5 | 555.5 | |||
1.5 | 1.2 | 1.8 | 2.6 | 3.0 | 8.6 | 4.8 | 5.9 | 7.1 | 8.7 | 26.5 | |||
11.1% | 10.1% | 10.0% | 7.4% | 8.7% | 8.4% | 7.8% | 7.4% | 7.1% | 7.4% |
Receivables ($m)
New sales ($m) Repayments & other ($m)
Closing Gross receivables ($m) Closing provisions for bad debts ($m) Closing net-receievables ($m)
Average gross recievables ($m) Receivables attrition rate (%)
Revenue ($m)
Revenue / qtrly transaction values (%)
Other key revenue assumptions New customers per month (No.) Period end customers (No.) Average number of customers (No.)
Average Spend Per Customer ($0.00) Transaction Value ($m)
Funding key assumptions
Total ZML cash utilised in recievables ($) VPC facility drawn ($m)
Interest rate VPC (%) Alternative facility drawn ($m)
Interest rate Alternative facility (%) Total drawn facilities ($m)
Total interest costs ($m) Blended interest rate (%)
SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES
Figure 7 - BDD assumptions | ||||||||||||
Period end | FY16 | 1Q17 | 2Q17 | 3Q17e | 4Q17e FY17e | 1Q18e | 2Q18e | 3Q18e | 4Q18e | FY18e | ||
Jun-16 | Sep-16 | Dec-16 | Mar-17 | Jun-17 Jun-17 | Sep-17 | Dec-17 | Mar-18 | Jun-18 | Jun-18 | |||
Provisions and Bad and Doubtful Debts | ||||||||||||
Opening provisions for doubtful debts ($m) | 0.1 | 1.2 | 1.9 | 2.9 | 4.4 | 1.2 | 6.7 | 9.0 | 11.8 | 14.9 | 6.7 | |
Additional provisions (what's expensed in P&L) $m | 1.4 | 0.9 | 1.3 | 2.1 | 3.3 | 7.6 | 3.7 | 4.6 | 5.3 | 7.3 | 20.9 | |
Bad-debts written off ($m) | -0.4 | -0.2 | -0.3 | -0.6 | -1.0 | -2.1 | -1.4 | -1.8 | -2.3 | -2.9 | -8.3 | |
Closing provisions for doubtful debts ($m) | 1.2 | 1.9 | 2.9 | 4.4 | 6.7 | 6.7 | 9.0 | 11.8 | 14.9 | 19.3 | 19.3 | |
Bad debts (180 days) % | 1.1% | 1.3% | 1.5% | 1.8% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | |
Provisions as % of total receivables (%) | 3.0% | 3.2% | 3.3% | 3.3% | 3.3% | 3.3% | 3.3% | 3.3% | 3.3% | 3.3% | 3.3% |
SOURCE: BELL POTTER SECURITIES ESTIMATES
Incorporation of minor equity raiseDue to the extreme nature of ZML's trajectory and following quarterly guidance from the company around cash outflows we have incorporated a higher fixed cost base in our estimates. The higher fixed cost base in combination with an increased requirement for subordinated cash in our forecast secured receivables financing facility as a result of upgrades to transaction volume and revenues result in us incorporating a minor equity raise of $5m in FY18.
Zipmoney Ltd. published this content on 25 January 2017 and is solely responsible for the information contained herein.
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