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    APT   AU000000APT1

AFTERPAY LIMITED

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Australia's Afterpay attempts to stem share slide as regulatory scrutiny mounts

10/20/2019 | 11:14pm EST

(Reuters) - Australia's Afterpay Touch Group Ltd on Monday moved to stem speculation about adverse changes to the country's payments regulation that have hammered its share price for several days, saying it was not currently subject to any inquiry by the central bank.

Afterpay was making its first statement since its shares began falling last week following a downbeat assessment from brokerage UBS and an announcement from the Reserve Bank of Australia that it planned to dig deeper into the buy-now-pay-later (BNPL) industry next year.

Afterpay's shares fell as much as 8.1% on Monday at A$27.25, its lowest level since Aug. 28. They have dropped 25.5% since last Wednesday when UBS initiated its coverage of Afterpay, valuing the company significantly under current market levels.

While Afterpay said on Monday it "is not currently subject to an RBA inquiry or review process", it will be part of the central bank's review of the payments industry in 2020.

Still, Afterpay asserts that it is not a traditional credit provider as its services extend far beyond the payment processing aspects of a transaction and are limited to certain purchases.

"Contrary to traditional credit models, Afterpay is a free service for customers who pay on time," it said in a statement.

"Afterpay generates the majority of its revenue from merchants who choose to provide Afterpay as a service, rather than merely a form of payment."

However, analysts said regulatory concerns would hang over the company, which is often seen as a bellwether of the BNPL sector.

"I believe there will be continued regulatory issues that are not going to be resolved anytime quickly," said Brad Smoling, managing director at Smoling Stockbroking.

The BPNL sector has become a darling of stock analysts due to its scope for global expansion and online shopping growth. Also attractive is its popularity among the Millennial and Gen Z populations because it provides easier access to credit than traditional routes.

VALUATION

A concerted push towards international growth - particularly in the United States - boosted Afterpay's stock for much of 2019, despite the company reporting a steeper loss in the year to June 30.

But Afterpay has also drawn the scrutiny of regulators; most notably financial crime watchdog AUSTRAC demanding an external auditor report for suspected non-compliance with money-laundering and counter-terrorism financing laws earlier this year.

Initiating coverage of Afterpay last week, UBS questioned the company's business model for disallowing merchants from passing on surcharges to their customers.

"In our view, somewhat paradoxically, the more successful BNPL services are, the more likely they are to attract regulatory scrutiny," UBS said, giving Afterpay's shares a target price of A$17.25 - just half the value of Afterpay's close on the previous day.

The RBA issued a report the following day saying it would review the payments industry in 2020, including an inquiry into prevalent "surcharging" practices.

(Reporting by Rushil Dutta; Additional reporting by Rashmi Ashok in Bengaluru; Editing by Tom Hogue and Jane Wardell)

By Rushil Dutta


ę Reuters 2019
Stocks mentioned in the article
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AFTERPAY LIMITED -1.78% 98.24 End-of-day quote.-16.75%
AMP LIMITED 0.53% 0.945 End-of-day quote.-39.42%
AT HOME GROUP INC. -0.08% 36.99 End-of-day quote.0.00%
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Analyst Recommendations on AFTERPAY LIMITED
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Financials
Sales 2022 1 475 M 1 033 M 1 033 M
Net income 2022 -30,8 M -21,6 M -21,6 M
Net Debt 2022 591 M 414 M 414 M
P/E ratio 2022 -2 332x
Yield 2022 -
Capitalization 28 516 M 20 021 M 19 964 M
EV / Sales 2022 19,7x
EV / Sales 2023 13,3x
Nbr of Employees 1 300
Free-Float 77,7%
Chart AFTERPAY LIMITED
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Afterpay Limited Technical Analysis Chart | APT | AU000000APT1 | MarketScreener
Technical analysis trends AFTERPAY LIMITED
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TrendsBearishNeutralNeutral
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 12
Last Close Price 98,24 AUD
Average target price 127,16 AUD
Spread / Average Target 29,4%
EPS Revisions
Managers and Directors
Anthony Mathew Eisen Co-CEO, Executive Director & Managing Director
Nicholas David Molnar Co-CEO, Executive Director & Managing Director
Rebecca Lowde Chief Financial Officer
Elana Rubin Independent Chairman
Dana Stalder Independent Non-Executive Director
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