Equities

APT has delivered a solid trading update with continued momentum in the business. Of particular note, the US customer growth rate appears to be accelerating, with around 130,000 added per month in January/February, accelerating to ~170,000 per month in March–May. This places APT on track to add a full million users in the US during the 2H19 period, with our estimate for it to close with 1.7m active US users at the end of June. Further, the UK business has launched under the brand Clearpay, with around 50 merchants integrated or in the process of launching.

Australia vs US average sales

The A&NZ average spend in 2H19 is tracking at around $852 per user, whereas the US is at around $567. The US average spend is similar to where A&NZ started, but we expect this to increase as more merchants are added, and as the US moves to instore to complement the online experience.

AUSTRAC reviewing APT and other international platforms

APT noted in its release that AUSTRAC has raised some issues in relation to its AML/CTF compliance. No specifics have been raised, however we do note that AUSTRAC was quoted in the press earlier this week noting it intends on reviewing a range of international platforms (including Facebook) for compliance.

Earnings revisions

Following APT’s trading update, we have upgraded our underlying active customer estimates by between 2.0–2.9%, while we have upgraded our underlying EPS by 1.2%, 7.3% and 4.8% for FY19, FY20 and FY21 respectively. The earnings revision is driven by higher customer growth and Total Transaction Value (TTV) estimates. We note that our CLV valuation methodology prioritises customer growth, particularly where gross margin and retention rates are healthy. Following these changes our revised Price Target is $29.28 per share (previously $28.02), with our Buy recommendation remaining unchanged.



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