Smartpay Holdings Ltd (ASX: SMP) shares have stormed out of a trading halt this morning to be up by as much as 14.29% in early trade. The trading halt was put in place on Wednesday, pending the announcement of a capital raising.

Dual-listed on the NZX, Smartpay is a small-cap payments share that has been trading on the ASX since 2013. With a share price of 46 cents at the time of writing, the company’s market capitalisation sits at around $80 million.

Smartpay is an independent full-service EFTPOS provider, directly servicing more than 25,000 merchants with around 35,000 EFTPOS terminals across Australia and New Zealand.

What did Smartpay announce?

Before the market opened this morning, Smartpay revealed it has raised $13 million via a placement to institutional, sophisticated, and professional investors.

Unlike many other ASX shares raising capital at meaningful discounts to their last closing price, Smartpay offered no discount to investors. It completed the raising at an issue price of 42 cents, which was in line with its last closing price on Tuesday.

Smartpay also intends to undertake a share purchase plan for retail investors at the same price of 42 cents, with more details to be announced next week.

According to the company, the funds raised will be used to capitalise the business for growth in both the Australian and New Zealand markets, as well as strengthen its balance sheet through debt reduction.

Commenting on the successful raising, managing director Bradley Gerdis, said:

After having proved up the Australian growth opportunity, as evidenced in our strong revenue growth figures recently released to the market for the year ended 31 March 2020, we are now readying the business to resume and accelerate our Australian growth and to pursue opportunities in the NZ market as we come through the COVID period.

Recent headline results

Earlier this week, Smartpay revealed it had seen a steady recovery in merchant transactions over the past 4 weeks – so much so that aggregate transactional revenue had recovered to 75% of pre-COVID-19 levels.

Prior to this, the company released a trading update in April, informing a 40% decline in aggregate transactional revenues as government restrictions affected the trading conditions of many of Smartpay’s merchants.

With a financial year ending 31 March, Smartpay recently revealed unaudited full-year FY20 revenue of NZ$28.3 million, up 34% from last year’s result of NZ$21.1 million.

The company expects the effects of COVID-19 to further entrench cashless and contactless payments and believes it is well-positioned to benefit from these positive tailwinds.

More reading

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Will Afterpay Ltd (ASX: APT) join the likes of Commonwealth Bank of Australia (ASX: CBA) and CSL Limited (ASX: CSL) and be an ASX blue chip of tomorrow?

The way the Afterpay share price has been performing in recent weeks would indicate so, at least.

Afterpay shares have been on an absolute tear since reaching a two-year low back in March. Then, Afterpay reached as low as $8.01 a share – a level not seen since June 2018.

Today, it’s a different story, with Afterpay at fresh all-time highs above $44 a share. Anyone who picked up some Afterpay shares in late March would be looking at a gain of over 400% in just two months.

So will this breakneck growth continue for Afterpay long enough to justify that coveted ‘blue chip’ status?

Does Afterpay have what it takes to become an ASX blue chip?

On current prices, Afterpay has a market capitalisation of $11.9 billion. That’s enough to put the company in the S&P/ASX 200 Index (ASX: XJO) to be sure – even into the ASX 50. But (at the time of writing), there is still a lot of space between Afterpay’s market cap, and the market cap of real ASX blue chips like Woolworths Group Ltd (ASX: WOW), Commonwealth Bank and CSL.

But there’s more to being a blue chip than just sheer size.

The term ‘blue chip’ derives from poker, where the highest value gambling tiles are coloured blue. Conventionally, ‘blue chip’ shares represent not just size, but safe cash flows and a robust business model. Afterpay is yet to fulfil those two criteria in my view.

But that doesn’t mean it won’t in the near future.

Afterpay’s opportunity for ‘blue chip’ status

For Afterpay to be a true ASX blue chip, I think it has to cement its position in the crowded field of the payments sector. It will need to prove it can become reliably profitable and prove it can fend off competition from the real blue chips in the payments space – the US giants MasterCard and Visa.

These companies are stupendously profitable and have market caps of $US292.2 billion and US$405.8 billion respectively.

Australia is a fantastic economy, but it’s my belief that it doesn’t offer Afterpay enough scale and ammunition for ‘blue chip’ status on its own, given Afterpay’s small-margin ‘clip the ticket’ business model. For Afterpay to truly succeed and become a blue chip, it needs to operate on a global scale much like MasterCard and Visa.

The good news is that Afterpay is heading in the right direction. Its US growth numbers are very pleasing, as are its numbers from the UK and Europe. Its partnership with Chinese giant, Tencent Holdings is also conducive for growth opportunities in Asia.

We’ll have to see if Afterpay can truly become an ASX blue chip. But I think it’s treading the right path!

More reading

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The reopening of the Australian economy and record-low interest rates has made the S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) rife with opportunities. For investors interested in the technology sector, here are three leading ASX 200 tech shares to consider buying today. 

1. EML Payments Ltd (ASX: EML) 

The EML share price ascended to an almost ‘market darling’ status following years of consistent organic growth and strategic acquisitions. However, global social distancing and lockdown measures due to the coronavirus have derailed its business model that is largely dependent on shopping centres and recreational activities. 

Prior to EML’s acquisition of Irish firm, Prepaid Financial Services (PFS), its revenue from shopping centre gift cards represented approximately 65% of group revenues. Its long-term strategy is to diversify its earnings away from its dependency on shopping centres. The acquisition of PFS pivoted its earnings to more General Purpose Reloadable (GPR) than Gift & Incentive (G&I). GPRs have various applications including salary packaging benefit accounts, fintech and digital banking, and sports betting/gaming. 

I believe EML’s positive business update and depressed share price bodes well with the reopening global economy. Its G&I segment should see volumes recover as lockdowns ease and trading conditions improve. 

2. Data#3 Limited (ASX: DTL) 

Data#3 is a business communications technology leader that provides an integrated array of solutions including cloud, mobility, security data and analytics and IT lifecycle management. The company’s 1H20 results announced that revenue had increased by 11.6% to $718.9m and NPAT jumped 41.5% to $8.7m. 

On 2 April the company provided an update on the impact of COVID-19. It cited that, to date, there has been no material change to its overall sales pipeline. Customers have been shifting their priorities to address immediate remote working, cloud and security requirements. Its performance to date and current pipeline of opportunities will help it achieve its full year financial objectives.

However, it noted that its performance is typically dependent on significant earnings in the fourth quarter, and it is too early to provide more specific guidance at this point in time. It reassured the market that approximately 60% of its revenue is recurring from contracts with government and large corporate customers. 

3. Tyro Payments Ltd (ASX: TYR) 

Tyro is one of the many businesses that will benefit from a reopening Australian economy. The company offers payment solutions for credit and debit card transactions.

As of 30 June 2019, 77% of Tyro’s merchants were SMEs and 86% were in the health, hospitality and retail sectors. Despite these sectors being hit the hardest by lockdown rules, Tyro only experienced a 38% fall in transaction values in April and 20% fall in the first two weeks of May (on prior corresponding period). The reopening of retail, restaurants and cafes should see volumes improve moving forward. 

More reading

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• ASX 200 down 0.2%: Big four banks lower and TPG announces demerger plans
• Why the EML Payments share price is rocketing over 12% higher today

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and Tyro Payments. The Motley Fool Australia has recommended Data#3 Ltd. and Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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