Technology Start-up Afterpay to List on ASX - Should Investors “Buy Now”?
The increasing demand for online sales, has resulted in growing numbers of online retail merchants.
Afterpay Holdings Limited seeks to raise $25m in an IPO to list on the ASX on 26 April. Afterpay is an Australian technology company focused on payment solutions in the online retail space
Most Australians are familiar with “buy now, pay later” deals from electronic stores like Harvey Norman or JB Hifi, or other household stores, which offer these kind of deals for computers, televisions, furniture or basically anything.
According to the Australian Bureau of Statistics (ABS) the Australian retail market was worth almost $300billion in 2015, and National Australia Bank estimates that the Australian online retail market was worth $19.1bn in the 12 months to December 2015. While traditional retails sales have grown approximately 4.5%, online sales expanded more than 10% during the same period.
The increasing demand for online sales, has resulted in growing numbers of online retail merchants. However, apart from the strong presence of Woolworths and Wesfarmers with their multi-channel sales presence, the online retail market remains highly fragmented.
Afterpay is an Australian technology start-up which offers a service and software infrastructure that allows retail merchant clients to offer ‘buy now, pay later’ programs to end-customers. Afterpay generates revenue via merchant and transaction fees and as at the date of the prospectus, the company had more than 100 retail clients and 38,000 registered end-customers. Since inception in 2015, Afterpay has witnessed strong demand for its services, and increased monthly revenue 10-fold.
Recent growth momentum and existing client network are attractive qualities. However the company was founded in mid 2015 and has a limited operating history, whilst being reliant one external capital to fund its daily operations. In order to sustain the trend Afterpay will use the proceeds of the raising to increase funding capital and also for general working capital. Demand for its product and early revenue streams are initial validation signals, however IPO participants are required to have a high risk appetite for this start-up.
Company: Afterpay Holdings Limited
ASX Code: AFY
Shares on Offer: 25m
Listing Price: $1.00
Market Capitalisation: $165m
Listing Date: Apr 26
This publication appeared first on The Australian
Author: Simon Herrmann
Apr 11, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.