Author: therawinformant

The Afterpay Ltd (ASX: APT) share price is underperforming the after the government released its latest findings on the sector.

The Afterpay share price dipped 0.4% to $101.40 while the S&P/ASX 200 Index (Index:^AXJO) rallied 1.2% this morning.

The Australian Securities and Investments Commission (ASIC) released its latest report, which found that more customers are falling behind on payments.

APT share price falls on ASIC findings

ASIC found that 20%, or one-in-five buy now, pay later (BNPL) users, are missing payments. This compares to one-in-six back in 2018 when the last study was undertaken.

The increase in customers that are likely being hit by late fees comes as popularity of BNPL services explodes.

“Notably, the number of buy now pay later transactions increased from 16.8 million in the 2017-18 financial year to 32.0 million in the financial year 2018-19, representing an increase of 90%,” said ASIC in a media statement.

“In the 2018–19 financial year, missed payment fee revenue for all buy now pay later providers in the review totalled over $43 million, a growth of 38% compared to the previous financial year.”

Fee revenue increasing

It’s also worth noting that Afterpay enjoyed 49% increase in customer late fees in FY20 to $68.8 million. This equates to around 16% of total income.

The increase is likely driven by the growing number of users on its platform as opposed to a higher proportion of customers running into financial strife.

This means Afterpay may be better placed than some of its rivals, like the Zip Co Ltd (ASX: Z1P) share price.

The Australian Financial Review reported that around 60% of Zip’s income comes from customers.

No new regulation expected

Another bright spot is that ASIC isn’t changing its tune when it comes to additional regulations for the industry.

The regulator is instead allowing BNPL organisations to develop a code of conduct to supplement the new “design and distribution obligations” that will come into force from October next year.

Nonetheless, ASIC’s latest findings could put more pressure on the BNPL sector to reign in fees or face a potential backlash that could prompt the government to impose new rules.

That would be the worse case outcome for ASX-listed BNPL companies, especially given the lofty multiples they are currently trading on.

The ASIC report reviewed services from Afterpay, Zip Co, FlexiGroup Limited (ASX: FXL), and Openpay Group Ltd (ASX: OPY), among others.

More reading

• Why does the Afterpay (ASX:APT) share price continue to outperform Zip (ASX:Z1P)?
• Afterpay (ASX:APT) share price lower after responding to ASIC report
• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• 5 things to watch on the ASX 200 on Monday
• 2 fast-growing ASX tech shares to buy

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

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 Australia has recommended FlexiGroup 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is still suspended due to a market data issue. However, prior to that, the market was up a sizeable 1.2% to 6,484.3 points.

Four shares that are climbing more than most today are listed below. Here’s why they are charging higher:

Althea Group Holdings Ltd (ASX: AGH)

The Althea share price has jumped 10% to 48 cents after the cannabis company announced a licencing agreement with Canadian-based, Earth Kisses Sky. According to the release, the contract will involve the manufacture of two topical products, with an order of 150,000 units split evenly between the two. In addition to this, the company has signed an agreement with Canadian cannabis beverage company, Electric Brands.

BWX Ltd (ASX: BWX)

The BWX share price is up almost 4% to $4.20. Investors have been buying the personal care products company’s shares after it announced a strategic partnership with British ecommerce company THG Holdings. According to the release, THG will provide a full-service solution, including localised digital capabilities for taking BWX brands direct to consumers across Europe and Asia.

Damstra Holdings Ltd (ASX: DTC)

The Damstra share price has risen 4% to $1.78 following the release of its annual general meeting presentation. At the event, management reaffirmed its guidance for FY 2021 and continues to expect revenue of $33 million to $35 million. This represents year on year growth of 60% to 70%. In respect to earnings, the company is forecasting earnings before interest, tax, depreciation and amortisation (EBITDA) of $5 million to $7 million.

GrainCorp Ltd (ASX: GNC)

The GrainCorp share price is up 3% to $4.44. Investors have been buying the company’s shares after analysts at Goldman Sachs upgraded them. The broker has upgraded GrainCorp’s shares to a buy rating with a $5.34 price target. Goldman commented: “We view GNC as providing an attractive combination of near-term cyclical tailwinds and long-term structural benefits.”

More reading

• Graincorp (ASX:GNC) share price is trading higher today on broker upgrade
• Damstra (ASX:DTC) share price storms higher on AGM update
• Why the BWX (ASX:BWX) share price is charging higher today
• Althea (ASX:AGH) share price on watch following 2 new agreements
• Wilson Asset Management thinks these 2 small cap ASX shares are a buy

James Mickleboro 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 Damstra Holdings Ltd. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Damstra Holdings Ltd. 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 Elders Ltd (ASX: ELD) share price started the day in the red, but has turned around following the company’s release of its FY20 results. During market open, shares in the agribusiness company fell as low as $11.63, before rebounding above Friday’s market close. At the time of writing, the Elders share price is fractionally higher at $11.88, up 0.59% so far today.

Let’s take a look and see how Elders performed in the 2020 financial year.

What’s drving the Elder share price?

The Elders share price is on the rise this morning as, for the 12 months ending 30 September, the company reported a robust scorecard despite being effected by drought, bushfires and COVID-19.

Sales revenue increased to $2,092.6 million, representing a 29% gain over the FY19 result. The performance was underpinned by Elders’ retail products which benefitted from a strong winter cropping season. In addition, its agency services saw an upside mostly in livestock, primarily driven by high prices for both cattle and sheep.

Underlying profit after tax grew to $109 million, up 71% from the $63.6 million recorded in the prior corresponding period.

Underlying earnings before interest and tax (EBIT) swelled to $119.4 million, a jump of 62% over the same time last year.

Pleasingly for investors, earnings per share (EPS) rose to 70.7 cents, shooting 35% higher. This reflected gross margin growth, tight cost control and reduced capital spending across the business.

Elders declared a fully-franked dividend of 13 cents per share to be paid to shareholders on 18 December. This brings the annual dividend payment to 22 cents, a 22% lift on FY19’s pay-out.

Management commentary

Elders CEO and managing director, Mr Mark Allison, commented on the performance of the business. He said:

Our solid business foundations and strict financial discipline, together with a commitment to ensuring the safety and prosperity of clients, communities and staff across Australia allowed us to succeed despite challenging operating conditions in FY20.

When the COVID-19 pandemic emerged, we proactively established a COVID-19 Response Committee that convened almost daily to monitor the evolving situation and respond swiftly. We focused on minimising the risk to our employees and the communities we operate in whilst also ensuring we could continue to serve our clients and play our part in keeping the food supply chain operating.

Launch of third eight-point plan

As a part of creating a leaner business model, Elders closed out its second eight-point plan in FY20. The company achieved its objectives of providing consistent financial returns on agricultural cycles.

Embarking on its third eight-point plan, management said:

Under our newly launched Eight Point Plan, we have again set ambitious financial goals – we are targeting 5 to 10% growth in EBIT and EPS through the agricultural cycles at a compelling ROC of 15%.

In addition, in this plan we have introduced new non-financial goals around sustainability and brand trust. Also new is the Systems Modernisation Program – a multi-year investment in a new, best of breed operating platform that will improve client experience and enable internal efficiencies.

FY21 outlook

Looking towards the remainder of FY21, Elders is forecasting its summer crop to rebound from its low levels last year. The company revealed it is seeing a recovery in demand for crop protection and fertiliser.

Cattle prices are expected to soften from the record high prices seen in FY20. However, Elders anticipates the prices to remain in the high-range.

Consumer demand for apparel is predicted to reduce as clothing supply chains have raised levels of unsold textiles and raw fibres. This is likely to lead to wool prices falling in the near term.

Moving across to its farmland segment, farm owners have been deferring their decision to sell due to the uncertainties surrounding COVID-19, which has driven up farmland values. 

About the Elders share price

At the time of writing, the Elders share price is trading 3.3% below its 52-week high. It has, however increased a whopping 84% year to date. 

More reading

• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• Why Elders, Jumbo, Northern Star, & PolyNovo shares are charging higher
• Best and worst performing ASX shares in the staples sector

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders 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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There are some ASX shares that have been hit hard by COVID-19.

Whilst some have recovered from that initial decline, like Bapcor Ltd (ASX: BAP) and Adairs Ltd (ASX: ADH), there are others that are still lower than the pre-COVID-19 share price. Are they worth buying?

Here are two examples:

Audinate Group Ltd (ASX: AD8)

The Audinate share price is still down 15% from where it was in mid-January 2020.

Audinate offers the Dante system. Audinate says that Dante replaces point-to-point audio and video connections with easy-to-use, scalable, flexible networking. Dante is used by hundreds of manufacturers in thousands of professional products.

The Motley Fool Share Adviser service recently shared its thoughts after the ASX share decided to do a capital raising: “Audinate has not had the greatest time recently. Given that a lot of its customers are linked to large public gatherings — the exact type of thing governments are trying to avoid during the pandemic — there was bound to be a negative hit. However, our recommendation on this company was always one formed through a long-term view. Audinate’s Dante protocol remains the undisputed leader in the digital A/V market with more than 8x the adoption of its nearest competitor. With Audinate expecting to use the bulk of the capital it raises to invest into manufacturing and research & development, it appears that Audinate is preparing to squash its peers once and for all.”

The ASX share recently released a trading update as part of its AGM. It said that there has been a steady improvement in trading conditions since May. It said that there’s good momentum in corporate conferencing and higher education, but there are challenging conditions in live sound and large events. The sales backlog is/was similar to the pre-COVID-19 level. It generated US$5.2 million of revenue and AU$0.3 million of earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter of FY21.

Is the Audinate share price a buy? The Motley Fool Share Adviser service still rates it as a buy and at the time of the capital raising said: “We continue to see a big future for Audinate”.

EML Payments Ltd (ASX: EML)

The EML Payments share price is still down 38% from the level it was at in February 2020.

EML is a business used to be largely focused on processing the payments made from gift cards in shopping centres. This is a high-margin business, but it has been affected by COVID-19 with closed shopping centres.

A few months ago the Motley Fool Extreme Opportunities service explained that there were some positives for the ASX share, despite the COVID-19 impacts:

“For the first time in the company’s history, the General Purpose Reloadable (GPR) segment now accounts for over 56% of revenue and is a source of more repeat transactions. With the completed acquisition of Prepaid Financial Services in Ireland, we think EML is rapidly becoming a diversified payments ‘platform’ with banking-as-a-service technology that could set the company up to be a key enabler for many fintech companies around the world.”

It was also pointed out that EML’s ControlPay platform is gaining traction with buy now, pay later companies like Zip Co Ltd (ASX: Z1P) which allows Zip customers to shop anywhere, rather than being limited to just merchants that have signed up to Zip.

The ASX share is also launching new services with new partners.

The company recently gave a trading update for the first quarter of FY21. It said that first quarter revenue was $40.6 million, up 75% over the prior corresponding period and it was 20% higher than the fourth quarter of FY20. It also said that its EBITDA of $10 million was up 215% compared to the prior corresponding period and up 69% compared to the fourth quarter of FY20.

The Motley Fool Extreme Opportunities still rates the EML Payments share price as a buy.

More reading

• These were the best performing ASX tech shares in October 
• 2 exciting small cap ASX shares that should be on your watchlist
• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches
• These were the worst performing shares on the ASX 200 last week
• 3 quality ASX growth shares to buy in November

Tristan Harrison 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 EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia has recommended ADAIRS FPO, AUDINATEGL FPO, and EML Payments. 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 Graincorp Ltd (ASX: GNC) share price opened 3% higher today after broker Goldman Sachs upgraded the company to a Buy rating. Goldman revised GrainCorp’s 12-month target share price to $5.34. This represents an 18% upside to the opening price of $4.40, and a 16% increase from the last target coverage. At the time of writing, the Graincorp share price is slightly higher, trading at 4.46, up 3.48%.

Why was GrainCorp upgraded?

Goldman said that GrainCorp provided “an attractive combination of near-term cyclical tailwinds and long-term structural benefits”. 

A major reason for the broker upgrade was GrainCorp’s successful demerger with United Malt Group Ltd (ASX: UMG) back in March this year. Goldman said the demerger enabled the agribusiness to work through an estimated 63% of the $108 million targeted savings, thus reducing its net debt position.

In addition, GrainCorp’s FY21 results were set to benefit from a bumper 2020 winter crop harvested in October. Harvest expectations have been revised higher this year, with the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) most recently forecasting a 112% growth in crops year-on-year. The rainfall has also supported the business, aided by La Nina conditions.

Apart from the agricultural harvest business, Goldman also notes that GrainCorp stands to gain from its trading and processing businesses in FY21 due to the bumper crop. 

Brief take on GrainCorp

GrainCorp is an agribusiness operating in more than 30 countries, with a focus on grains, oilseeds, pulses, edible oils and feeds. 

The company has an integrated supply chain, starting from accumulation and storage which links up to road and rail freight options and eventually, port facilities. GrainCorp primarily operates across the segments of grains and oils. Malt was previously another key segment, however, this was spun-off into a new ASX-listed entity, United Malt Group Ltd,  in March 2020.

GrainCorp share price performance in 2020

GrainCorp reported an improved financial performance following a year of significant transformation. The company reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations of $108 million. This compares to an underlying EBITDA loss of $107 million a year earlier. Net profit after tax (NPAT) came in at a loss of $16 million, but is still a major improvement on FY 2019’s $158 million loss.

The GrainCorp share price has had a bumper year,  rising by more than 30% on a year-to-date basis. At the current price of $4.40, the company commands a market capitalisation of $986 million.

More reading

• 5 things to watch on the ASX 200 on Monday
• ASX 200 down 0.35%: Ramsay Q1 update, NEXTDC’s international expansion, gold miners surge
• Here’s why the GrainCorp (ASX:GNC) share price jumped 8% higher today
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Eddy Sunarto 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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Trade execution and market data on the ASX is currently frozen.

Market participants said they have not been able to execute trades from about 10.24 am this morning. 

The ASX says “it is currently investigating a market data issue, and that all trading would be paused while it worked to rectify the issue.”

The ASX equity market is currently paused and there is no trading while we investigate market data issues. ASX apologises for the disruption and is working to rectify the issue as soon as possible.

— ASX 🏛 The heart of Australia’s financial markets (@ASX) November 15, 2020

https://platform.twitter.com/widgets.js

The market remains in an enquire state, with no trading orders able to be entered, amended or cancelled. 

Note that the ASX Trade Refresh went live this morning after migration activities on Saturday.

More to come.

More reading

• How Warren Buffett’s strategy can help investors to capitalise on a market crash
• Damstra (ASX:DTC) share price storms higher on AGM update
• Why does the Afterpay (ASX:APT) share price continue to outperform Zip (ASX:Z1P)?
• Think Childcare (ASX:TNK) share price lifts 4% on buyout offer
• 2 top ASX healthcare shares that could be market beaters

Motley Fool contributor Eddy Sunarto 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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Warren Buffett has a long track record of capitalising on stock market downturns. As such, it could be a good idea for investors to follow his advice at a time when the prospect of a second market crash appears to be relatively high.

The ‘Sage of Omaha’s’ long-term approach and focus on high-quality companies may help him in identifying the best investment opportunities while other investors are selling stocks. Over time, this may lead to market-beating returns.

Warren Buffett’s long-term approach

Warren Buffett’s time horizon is exceptionally long. In fact, his favoured holding period is rumoured to be ‘forever’. As such, he is unlikely to become too concerned about a temporary decline in stock prices. Although a market crash may feel as though it could last in perpetuity, the reality is that no market downturn has ever continued without eventually becoming a bull market.

Therefore, adopting a long-term view may help an investor to look beyond short-term chaos in order to purchase the best companies on offer. Certainly, it is extremely difficult to know when a market downturn will come to an end. However, indexes such as the FTSE 100 Index (FTSE: UKX) and S&P 500 Index (SP: .INX) have always recovered from their declines to post new record highs. Investors who purchase undervalued stocks and hold them for the long run therefore stand a good chance of generating impressive returns as the economy recovers.

If Warren Buffett instead took a short-term view of his portfolio, he would not be in a position to take advantage of a market crash. Instead, he would probably react to short-term market movements. This could lead to losses because of the unpredictable nature of stock prices over a short time horizon.

Buying high-quality stocks

Warren Buffett also buys high-quality companies in a market crash. They are more likely to overcome potential economic challenges and weak operating conditions than their peers. This may be because they have a more solid financial position or a clear competitive advantage, for example. Furthermore, they may also be better placed to benefit from a likely long-term recovery. They may have a unique product, a dominant market position or lower costs than their sector rivals that allow their bottom lines to move higher at a faster pace.

Through owning the most attractive businesses within a sector, an investor’s risks may be lowered and their return prospects could be improved. Therefore, it may be worth analysing companies within a specific sector to unearth the most attractive purchases that can deliver the highest returns in the long run.

Warren Buffett has previously engaged in relatively few purchases even during a market downturn. Therefore, it may be prudent to be selective when deciding which companies to purchase. Doing so may lead to a better portfolio performance and a stronger recovery as the economy returns to positive growth in the long run.

More reading

• Damstra (ASX:DTC) share price storms higher on AGM update
• Why does the Afterpay (ASX:APT) share price continue to outperform Zip (ASX:Z1P)?
• Think Childcare (ASX:TNK) share price lifts 4% on buyout offer
• 2 top ASX healthcare shares that could be market beaters
• Afterpay (ASX:APT) share price lower after responding to ASIC report

Motley Fool contributor Peter Stephens 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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The Damstra Holdings Ltd (ASX: DTC) share price has started the week on a high.

In morning trade the integrated workplace management solutions provider’s shares are up 4% to $1.78.

Why is the Damstra share price racing higher?

Investors have been buying the company’s shares this morning following the release of a presentation ahead of its virtual annual general meeting.

At the event, Damstra’s Executive Chairman, Johannes Risseeuw, spoke about the company’s strong performance in FY 2020.

As a reminder, in FY 2020, the company delivered a 47% increase in revenue to $23.5 million. This was underpinned by strong demand from existing customers and an increase in customer numbers from 129 to 279.

Mr Risseeuw was particularly pleased that 90.7% of its revenue is now recurring, with churn levels under 0.5%. He believes this “demonstrates the high quality of our revenue, the importance of our solutions to deliver a safe working environment and the commitment of our customer base.”

Pleasingly, the company has started FY 2021 strongly and the chairman appears confident on its prospects.

He commented: “We have entered FY21 with great energy and excitement and presently integrating the Vault transaction which is ahead of our internal planning. We see this as a year of continued evolution with our business having size, scale and increasing product innovation effort to accelerate domestic and international growth. From an investor perspective, this is important as we believe we have reduced our overall risk profile while increasing our organisational capability.”

FY 2021 guidance.

Management has reaffirmed its guidance for FY 2021 and continues to expect revenue of $33 million to $35 million. This represents year on year growth of 60% to 70% and includes the benefits of the Vault acquisition.

In respect to earnings, the company is forecasting earnings before interest, tax, depreciation and amortisation (EBITDA) of $5 million to $7 million. This compares to underlying EBITDA of $4.8 million.

Management notes that its underlying EBITDA margin will soften to 15% to 20% in FY 2021 from 23.4% last year. This is due to the Vault acquisition. It explained that its margins will be impacted due to transaction costs and Vault previously operating as an EBITDA negative business. However, it stressed that Vault will not change its financial business model.

More reading

• Wilson Asset Management thinks these 2 small cap ASX shares are a buy
• 3 exciting small cap ASX tech shares to watch
• 3 of the best mid cap ASX shares to buy right now
• Why the Damstra (ASX:DTC) share price is climbing higher today

James Mickleboro 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 Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. 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 Zip Co Ltd (ASX: Z1P) and Afterpay Ltd (ASX: APT) relationship almost feels like a sibling rivalry, except one is stealing the spotlight and delivering a far superior performance.

Looking back, buy now, pay later (BNPL) shares, more broadly speaking, were able to set fresh record all-time highs leading into the August reporting season on the back of unrelenting bullishness for the sector. The BNPL sector reached a near-term peak in August that was followed by a subsequent selloff. This may have been due to full year results that were arguably already ‘priced in’ and increasing competition from the likes of payments giant PayPal Holdings Inc (NASDAQ: PYPL) and local banks. 

Fast forward to today, the Afterpay share price has lifted almost 40% from the August sell-off. It cruised past the $100 per share mark with ease while the Zip share price continues to linger at 6-month lows of around $6. Here are some reasons as to why the Afterpay share price continues to dominate Zip. 

Superior growth performance 

For the most part, Afterpay has been able to deliver superior growth across all financial and operational metrics. In FY19, Afterpay delivered a 140% increase in transaction volume and 115% increase in revenue compared to the respective 108% and 138% from Zip. In FY20, Afterpay’s transaction volume increased by 112% and revenues increased 103% compared to respective 87% and 91% from Zip. 

Increasing global expansion 

Zip currently rivals Afterpay in terms of its international footprint with operations in Australia, New Zealand, South Africa, the United States and the United Kingdom. At face value, Zip does operate in more countries compared to Afterpay. 

However, Zip does not report on the individual performances of New Zealand and South Africa. This is likely due to the minimal revenue contribution from its smaller markets. In Zip’s FY20 report, the company did mention that it had “over 200 merchants integrated to-date” in South Africa. This compares to its 27,600 merchants in Australia and 6,800 merchants in the US. 

By comparison, in Afterpay’s FY21 first quarter report, the company revealed that its acquisition of Pagantis, a European BNPL provider, was “progressing well” and “on track for completion by the end of the 2020 calendar year, pending regulatory approval by the Bank of Spain”. Pagantis will provide Afterpay with immediate licence to operate in Spain, Fance, Italy and Portugal as well as pending licence passport applications in Germany and Poland. 

Afterpay’s plans to expand into Asia are also progressing well with an established base in Singapore to drive its development in the South East Asia market.

More reading

• Afterpay (ASX:APT) share price lower after responding to ASIC report
• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• 2 fast-growing ASX tech shares to buy
• 5 things to watch on the ASX 200 next week
• 3 ASX shares rated as buys by brokers

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 and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings. 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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Think Childcare Ltd (ASX: TNK) advised the ASX today that it has received a non-binding and indicative buyout proposal from private equity group, Alceon Group Pty Ltd.  The offer is for 100% of Think Childcare’s shares, and the indicative offer price currently stands at $1.351 – a premium on the current share price of $1.31. 

The Think Childcare share price opened today at $1.31, up by 4.8%, after the announcement.

More details about the offer

Alceon Private Equity has indicated it is willing to offer all cash, or a combination of cash and unlisted shares in a newly incorporated holding company. 

Think Childcare has granted Alceon a period of exclusivity until 18 December 2020 to complete its due diligence process. The company says the transaction is subject to various conditions such as regulatory as well as shareholder approval. As such, it has requested its shareholders not to take any action at this time.

What is Think Childcare and why might it sell the business?

Think Childcare owns and operates childcare facilities in Australia. It focuses on operating its 30 long day childcare facilities for children between the ages of 6 months and 6 years old.

The company has faced difficulties this year as coronavirus lockdown restrictions also closed down many of its childcare centres. As a result, the company is under pressure to service its debts. The latest balance sheet data for 30 June shows that Think Childcare has $35.8m liabilities that are due within a year, and $211.9m in the year following.

 Although Think Childcare holds $11.8m in cash and has $8.48m of receivables due within 12 months, the much larger liabilities figure is casting a towering shadow over its liquidity and current market cap of just $76 million.

Think Childcare share price performance

As mentioned, childcare centres were among the first businesses shut down by the government when the pandemic struck. The Think Childare’s share price went from $1.41 at the start of 2020 to 60 cents by the end of March, at the height of the restrictions. The share price has since regained much of its value. It is trading up 4% at $1.30 at the time of writing.

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Motley Fool contributor Eddy Sunarto 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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