Tyro (ASX:TYR) share price drops despite April transaction values surging 155%

The Tyro Payments Ltd (ASX: TYR) share price is slipping today, despite yet another positive COVID-19 trading update. 

At the time of writing, the Tyro share price is down 2.3% to $3.83 per share. However, Tyro shares have rebounded more than 50% in the last 3 months following the company’s crippling terminal outages and scathing short seller attack back in January. 

While its recovery story is in its early days, the business has so far shown promise in improving its transaction values and driving additional growth initiatives. 

What’s driving the Tyro share price?

Today’s COVID-19 trading update highlights a 155% date-on-date increase from 1 April to 23 April. This compares to the respective 40%, 10% and 10% improvement in March, February and January on the prior corresponding period. 

The strong uplift in April transaction values could be driven factors such as the Easter holidays and the government’s $1.2 billion tourism support package. 

Retail trade data is also supportive of the improvement in Tyro’s business, with the Australian Bureau of Statistics (ABS) revealing a 2.3% seasonally adjusted increase in March 2021. This was led by increases in Victoria and Western Australia, with both states rebounding from COVID-19 lockdown restrictions during February.

The ABS highlighted that cafes, restaurants and takeaway food services led the industry rises, which were again driven by Victoria and Western Australia. 

The data is good news for Tyro’s business with 35% of its merchants in the hospitality sector that drive 43% of transaction values, as per its 1H21 results.

From a regional perspective, Victoria and Western Australia contributed a respective 18% and 11% of transaction values in the first half. While Western Australia’s contribution to overall transaction values have remained steady, Victoria has slipped from 25% in FY19, to 23% in FY20 and 18% in 1H20. A recovery in Victorian transaction values could be key in driving the Tyro share price.

Growth initiatives in FY21 

Tyro Connect

Tyro is working on a solution to connect apps and services with a business’ POS system. The company is currently focused on the most critical areas of Australia’s hospitality businesses including ordering, menu management and bookings. 

This feature enables hospitality businesses to easily integrate and more effectively use the apps they need to thrive in today’s competitive market. Tyro has currently signed up apps including DoorDash, Deliveroo, Google and more. 

As a relatively new feature, Tyro has signed up 71 merchants as at 18 February, with 286,000 transactions processed. 

Bendigo Bank alliance 

In October 2020, Tyro signed a partnership with Australia’s fifth biggest retail bank, Bendigo and Adelaide Bank Ltd (ASX: BEN). This partnership is expected to drive Tyro’s key performance metrics across transaction values and merchants. According to Tyro, pre-integration activities are tracking well, with commercial completion expected by the end of 2H21 to be followed by a roll-out. 

Merchant dongle solution 

While Tyro CEO, Robbie Cooke believes a terminal outage of such magnitude will “never happen again”, the business is preparing a back-up solution.

Tyro is developing a dongle failover solution for every merchant as an extra level of safety and means to rebuild merchant trust. 

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Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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