New BNPL enters ASX: How it promises to be different

Yet another buy now, pay later provider is listing on the ASX this week – but the company promises it’s different to the rest.

Payright Limited (ASX: PYR) will start trading 11am AEDT on Wednesday after selling out its initial public offering (IPO) at $1.20 per share. The business will float with a market capitalisation of about $107 million.

The fintech will make it on to the bourse just before a quiet time over Christmas.

The Motley Fool spoke to co-founder and executive officer Myles Redward, who said the stock market was currently welcoming of new entrants.

“There’s a lot of positive sentiment, particularly for our sector buy now, pay later,” he said.

“It really was a case of trying to capitalise on that sentiment. Take advantage of the stock prices we’re seeing more broadly.”

Who can blame him. 

Afterpay Ltd (ASX: APT) shares are up 270% so far this year, and more than 1,335% since the March COVID-19 crash. Zip Co Ltd (ASX: Z1P) is up 48% year-to-date and more than 340% since its March trough.

How Payright is different to other BNPL

According to Redward, his business’ main moat is that it targets a different consumer compared to most other BNPL providers.

“If you look at most of the micro-ticket buy now, pay later providers, we’re talking sub-$1,000. Typically have average transaction sizes ranging from $150 to $500,” he said.

“For us, our average transaction size is about $3,000.”

So rather than clothing or small appliances, Payright users are paying for home renovations, health and beauty, or even higher education fees.

In fact, education contributes 34.1% of the gross merchant value that runs through the Payright system – the highest of any sector.

“Being a higher price point, it lends itself to a wider range of industry types, more diversified.”

To mitigate the risk of lending out bigger amounts of money, Payright does have to be more discriminating about the end users it lends to.

“We do put our applicants through a more robust credit assessment process,” Redward told The Motley Fool.

“So we do credit checks through Equifax Inc (NYSE: EFX), we consider a range of stability and capacity type measures and inputs… We ID-verify to safe harbour standards.”

Payright’s post-IPO plans

The IPO was set to raise $10 million or up to $20 million if it was oversubscribed.

Payright ended up landing $18.5 million. Combined with a pre-IPO capital raising round a few weeks ago, it now has $25 million to play with.

The money will be spent on sales and marketing, product development and technology – all in the name of growth, according to Redward.

“The reason we’re doing the IPO is to really accelerate and turbo-charge that growth over and above what we’ve been able to achieve.”

Revenue did rise close to 190% for the 2020 financial year compared to 2019, but it was coming off a low base. The business made a $8 million net loss off a turnover of $9.85 million for the year ending 30 June.

Australia remains the priority market, although its nascent New Zealand operations have just reopened after pausing during the first COVID-19 outbreak.

More reading

• The most crazy ASX chart of 2020
• Here’s how rich Afterpay (ASX:APT) shares have made shareholders
• ASX 200 Weekly Wrap: ASX hits new post-March high
• Top brokers name 3 ASX shares to buy next week
• How useful is the P/E ratio in assessing ASX shares?

Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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